Stablecoin Payroll Replaces Banks for Crypto Startups – Megan Knab

Episode Overview

Megan Knab is the founder and CEO of Franklin Payroll, a payments company that bridges the gap between traditional finance and blockchain. With a background in accounting and fintech, Megan brings firsthand insight into the systemic challenges crypto companies face—especially when it comes to payroll, tax compliance, and banking access.

Franklin offers a self-custodial payroll platform that enables companies to automate complex, multi-currency payments using stablecoins, bypassing banks while remaining fully compliant. Megan is passionate about transparency, tax code accessibility, and building fintech tools that empower global businesses with modern, programmable infrastructure.

Episode Transcript

Megan Knab: The gusto is just work. Striplings of the world are not interested in supporting crypto. Some of the early payment softwares in crypto certainly did not meet the need. Certainly did not care about this idea of withholding and remitting taxes, and so thought it was a great idea and spun it out. And we’ve been operating for three years. We have a bunch of customers. We’re doing millions every month in a mix of cash and crypto processing, payroll, processing bills, doing revenue management for customers.

Kevin Rosenquist: Hey there. Welcome to PayPod, where we bring you conversations with the trailblazers shaping the future of payments and fintech. My name is Kevin Rosenqvist. Thanks for being here. Traditional banks have long acted as gatekeepers of the financial world, but for crypto businesses, those gates are often slammed shut. My guest today is Megan Knab, CEO and founder of Of Franklin, a platform redefining how businesses manage payments and payroll. By straddling the worlds of stablecoins, blockchain and traditional finance. In this episode, Megan breaks down what Debanking actually looks like for crypto companies. Why Programmable payroll is more than just a buzzword, and how Franklin is using blockchain and stablecoins to build faster, smarter, and more transparent financial infrastructure. From navigating legacy systems to training AI in the US tax code, this conversation uncovers what the future of finance could look like without needing a bank at all. Interesting stuff. So please welcome Megan Knabb. I’ve had people on the show before from crypto companies and that have said they’ve actually gotten These are companies that are actually getting booted even if they’re playing by the rules. Why is this happening and what are the consequences for these businesses?

Megan Knab: I think the hard thing to understand about Debanking is that there have not historically been a set of rules that you could follow. It’s been a moving goalpost for a lot of individuals. A lot of companies that have been attributed to traditional financial institutions like banks, assess risk parameters. And this notion of risk parameters has been very opaque. And so I have felt it personally. Personally, my personal individual bank accounts have been shut down because I’ve connected a bank account to a crypto exchange. And I think if you talk to any operator working at a crypto startup or a consulting firm that might have stablecoins on their balance sheet, we can all trade war stories about what it’s like to find a bank that is willing to even talk to us. And it’s only recently that debunking has come to light as an actual thing that is real, that people and companies have experienced, and we’ve uncovered some of the, you know, reasons why debunking was an actual policy in the United States. So it’s all sort of coming to the surface. And I think a lot of the resolutions for it are coming to the surface now as well.

Kevin Rosenquist: There was I actually had a guest on who said that a lot of it had to do with the last administration in this country, that they were very anti crypto and that there was actually some there was some, some government entities telling banks to not work with crypto companies. Do you know, have any information if that’s true.

Megan Knab: So I think that one of the things that happens in this discussion around debunking is that it becomes very partisan politically, very quickly. And I think one of the things.

Kevin Rosenquist: What doesn’t these days?

Megan Knab: Yeah, of course, one of the things that I think we miss as part of this, like nuanced kind of conversation that should be happening is that, you know, the United States has one of the most sophisticated capital markets in the world, the most sophisticated capital markets structure in the world. And behind that is a large administrative state that exists no matter what president is in power. And so I think that a lot of this is more attributable to this sense of, you know, institutional norms rather than any kind of political trade wind that exists. But yeah, I think, like, you know, we know there’s a lot of research there. There are policy documents that were sent, opinion letters that were sent between government agencies during a certain administration that have been coined around this, this kind of movement called Operation Choke .2.0, that is real. Whether or not it’s a Democratic or Republican thing, I think that’s less relevant to like the reality of the situation.

Kevin Rosenquist: A lot of your customers run legitimate operations, but they’re doing so without access to traditional banking. What does that look like in a day to day setting?

Megan Knab: Yeah, I well, first off, I think that there’s a misconception around companies that operate in the crypto industry as being scammers and things like that. There are certainly unsavory actors in crypto. There are unsavory actors in a lot of industries.

Kevin Rosenquist: Everyone, maybe every industry.

Megan Knab: Yeah.you know, just to rewind a bit, like I used to be an accountant at a big law firm and uncovered this massive accounting fraud happening at that firm. And so it’s not to say that one industry is corrupt, and another industry is totally clear, like there are good and bad actors everywhere. But what I think that people miss sometimes about companies in crypto operating in the United States is there’s actually a much higher bar to be able to operate a business because of all the enhanced due diligence, all of the intense compliance requirements and things like that that companies that want to touch crypto have to meet. So that’s one thing I would say. If you’re operating a crypto business in the US, there’s a very high bar to be able to do so. But a large part of why I started my company, Franklin, was because it was clear that the struggle was asymmetrical, was unnecessary, and that there were ways to be able to operate both in our traditional fiat world and also on chain in a compliant manner. And, you know, it’s just sort of the benefit of being early in an industry where those tools needed to be built. And I had the motivation and the resources to start building them.

Kevin Rosenquist: Are stablecoins sort of the key to solving this crypto banking crisis?

Megan Knab: Stablecoins are a big part of it, for sure. Yeah, I think that stablecoins are a massive step function improvement to the current financial system. They are an alternative to traditional banking rails. And honestly just a very easy way for businesses to move their operations on chain because it’s just a different level of financial orchestration in fiat than if you were using a bank. And so stablecoins are a big part of it. But they’re not tied to the banking system either. So yeah they’re helpful. Sometimes they’re actually a little bit more difficult to use because of the bar to getting into using stablecoins and the disclosures required to have cryptocurrencies on your balance sheet. But once you overcome those hurdles, I think it actually makes operating your business a lot easier.

Kevin Rosenquist: Yeah. Almost like it’s like a bridge. It’s okay, this is sort of a little bit of a mix of both. So maybe people are a little more comfortable with it because it’s a little different than, you know, straight tokens or straight straight crypto. Right. Yeah, that makes sense. So can you explain, perhaps in simple terms,  how Franklin uses blockchain to streamline things for businesses like invoicing, tax compliance. You know, give me the meat of what you guys do.

Megan Knab: Yeah, certainly. So we started off with our core product that we launched a few years ago when we were just getting started. It was a payroll product, and it’s still the cornerstone product that we have now, although we’ve expanded into a lot of other areas. And it’s funny, when we go to these more, as we would call them, traffic payments conferences, payroll conferences, we have historically been like the odd man out in the corner, the weird crypto people in crypto circles. We’ve been weird.

Kevin Rosenquist: You got the punk rock haircut and like, you know, the ripped up jeans. You’re in the corner smoking cigarettes.

Megan Knab: Well, you know, and we’re like, yeah, we’re accountants and we want to help you pay your taxes better, right?

Speaker3: So. Right, right.

Megan Knab: It’s a bit like a lot of cognitive dissonance from, to be honest, both ends. And now it seems like there is this kind of convergence of a lot of fintech, a lot of traditional financial institutions all starting to kind of take a look at what stablecoins can do, the benefits of them. And, you know, we’re sitting here like, yeah, this is what we’re talking about. Like, come on over. Like the water’s warm. It’s the place to be. And yeah, I think it’s been certainly interesting to kind of be straddling these, these two worlds. Yeah.

Kevin Rosenquist: Why did you start with payroll? What was the reason behind that?

Megan Knab: Yeah. So my background is in accounting.  I’ve been like a staff accountant on Wall Street for a number of years.  got kind of. I learned about crypto while I was doing my MBA and sort of, you know, left Wall Street for crypto a number of years ago and had been CFO at a company that had a multi-currency balance sheet. And so figuring out how to run operations in a mix of currencies and not just foreign currencies, also digital assets was a real challenge. And so I spent a lot of time looking at different solutions that were on the market. You know, for reference, the company is called serotonin, their marketing firm. They’re fantastic. When I got there, there were maybe 12 employees. And you know, over the years being there, we scaled it to over 60 people, went from, you know, kind of minimal revenue to over a million in monthly revenue coming in in a mix of currencies. And the biggest problem we had by far was figuring out how to pay this remote global team in a compliant manner, in a cheap manner, in a way where I wasn’t spending all of my time trying to asset manage our balance sheet.

Speaker3: Yeah.

Megan Knab: And so, yeah, sort of prototyped Franklin within that organization. And, you know, was kind of like looking around at the market to be like, well, you know, the gusto’s just work striplings of the world are not interested in supporting crypto. Some of the early payment softwares in crypto certainly did not meet the need, certainly did not care about this idea of withholding and remitting taxes. And so,  I thought it was a great idea and spun it out. And we’ve been operating for three years. We have a bunch of customers. We’re doing millions every month in a mix of cash and crypto,  processing payroll, processing bills, doing revenue management for customers. And so, you know, we’re certainly, I think, on the bleeding edge of this kind of emerging market. And it’s been just like the most exciting, most interesting place to be in pain.

Speaker3: Yeah, that’s really cool.

Kevin Rosenquist: And what a great point about remote work and people hiring, you know, people from all over the world. I mean, that that makes it so much. Yeah. I guess I never really thought about how difficult it would be to pay those people.

Speaker3: Yeah.

Megan Knab: I mean, it’s tough. I think the pandemic really created a new norm in terms of how teams work together, how companies think about hiring and being able to pay those people and incentivize them, and make sure that you’re meeting the labor regulations in whatever jurisdiction they’re in. Those are non-trivial problems. And so there’s been an advent of international professional employer organizations and things like that which have been helpful. But, you know, they’re expensive. To be able to move money from A to B is extremely expensive. There are a lot of middlemen in the in-between. And one of the benefits of stablecoins, at least for the time being, outside of just the speed and cheapness of international remittances, is the exposure to the US dollar, which has been something that has been very attractive to, you know, I think people in a lot of different kinds of jurisdictions. You know, we work with teams that are have a bunch of developers based in Argentina, based in different areas of like Eastern Europe and things like that. And for them, it’s a huge perk to be able to get paid in USD denominated asset. But there’s a lot more to it. Payroll is super complex there, up to 250,000 permutations per paycheck at a given payroll run. And so, you know, one of the things that we’re really excited about is the programmability of stablecoins and how, you know, when you run a payroll run, you don’t have to initiate thousands of ACH. You could just have all that logic present at the money movement.

Kevin Rosenquist: Level.

Megan Knab: Which is something we’re super excited about.

Kevin Rosenquist: Yeah for sure. Definitely. I guess we don’t get political on this show, but I guess we’ll have to wait and see if people still value the dollar the same way that they have. Yeah.

Megan Knab: Yeah, yeah. Well, one of the things too is just, you know, having digital digitized Fiat also offers a lot of flexibility, right? If you want to be going between different currencies, you don’t have to be going through brokers or international exchanges. And like multiple banks that are each taking a cut along the way, you could be just trading on an automated market maker. You know, that’s kind of exciting. But it’s bleeding edge, you know.

Kevin Rosenquist: Yeah, yeah. Do you feel like traditional you know, legacy systems just don’t work for modern businesses?

Megan Knab: That I think the idea that traditional systems don’t work for modern businesses was the idea I had when I first started Franklin a few years ago, and it’s been interesting to really dive deep into things like ADP and these really like, you know, they were the first to market. They’re still the massive market leaders.

Kevin Rosenquist: Humongous.

Megan Knab: Yeah, humongous. They have such intense distribution. And it was as a young, idealistic, very enthusiastic founder, I was like, why is everybody not switching over to Franklin? Because we’re better. You know, and I think that’s something that a lot of startup founders have to come to grapple with, where there’s a reality of, you know, having things that are more streamlined, a better user experience, and, you know, whatever XYZ, you can be a little bit cheaper at the margins. And like, what does it take to get people, especially in enterprise software, to be okay with switching costs, payroll. And a lot of venture capital investors love the idea of payroll because it is so sticky. So it’s like if you’re almost having better tech is like, not not even like a question. Obviously you have to have better tech if you have a chance at competing. It’s more your distribution mechanism. Like how can you go after and beat these guys. And so there’s some part of me that is a little bit sad for my fellow payroll founders out there because, you know, if you’re integrating with RTP or Fednow, like, yeah, you can be a little bit faster than some of these other guys and they will certainly integrate it. Um, at some point and as money movement gets faster, we see it in the equities markets moving from T2 settlement of trading stocks to T0. Eventually we’ll see it in payments too. You know, it’s just the question I think is, do these traditional banking rails that are closed off that are still expensive, that sometimes have these negative incentive structures, is that the future? Is that what everybody’s going to be using? And my thought is probably not. And people are going to be using stablecoins. People will be using programmable money in the future. And that’s really what we’re making the bet with Franklin on. And yeah, I mean, it’s kind of a crazy futurist type of thing to make, but I think it’s the right one.

Kevin Rosenquist: So yeah, I think so too. I think it sounds awesome. You mentioned the Programable payroll. Yeah. Can you kind of describe how you guys make that a reality and what the impact is as far as cash flow or even employee trust?

Megan Knab: Yeah, yeah. I think like if we were there a couple levels of it. So when I talk about programmability, right. It’s this idea that I live in New York City, so I have 8 or 9 deductions that take place every month that go to New York City, New York State that like, you know, whatever paid family leave disability, right? All of these things need to get segmented out of my paycheck. My employer has to pay certain taxes because I’m here. And then it gets batched up, sent to an escrow account, and then the payroll software makes a filing and sends a wire to New York City. If you have a staff of ten, 50, 10,000, right, you can see how this data problem gets quite a bit larger. There are, you know, if you’re at a company with over 75 people, you probably have a dedicated payroll department where you have people sitting in the back office that all they’re doing is reconciling and checking, you know, their latest rate increase letters and things like that on a per state basis. And for us, you know, we are approaching these kinds of tax and money movement problems to say, how can we just remove humans from this process entirely. And so I have to have my paycheck split up in eight different ways. That means there’s eight different ACHs that happen and that costs money. It has. There’s a lot of time involved in pulling money via ACH from a bank and then pushing it into an escrow account, and then moving that money from an escrow account to a state, you know, checking account or whatever, wherever the payments go. And so that time period also creates a lot of risk. And so if we can move it faster, if we can move it smarter, where we don’t have to create so many separate pulls and pushes, can we be creating a much more efficient, streamlined, cheaper, faster payroll process? And I think, like, you know, the past two years of our product being in full operation, we’ve been able to prove that theory.

Kevin Rosenquist: Do the public ledgers and automated tools and things like that. Do you think they’ll reduce errors? Will they improve tax reporting for businesses?

Megan Knab: They can certainly reduce errors and I think that they can reduce errors because accounting is a retroactive exercise, right. So if you are looking at transaction history that’s sitting on an immutable public accounting, um, your ability to miscategorize or misattribute funds or something like that is basically zero. You have to be really horrible at your job to be making those kinds of mistakes. If you’re reading it off of a blockchain. They’re certainly specialized, kind of like you need to learn how to read it, you know?

Kevin Rosenquist: Yeah, you have to, you have to get it. Yeah

Megan Knab: Yeah. Exactly. I think that there’s some level of money moving faster across payroll specifically, that is less relevant because money doesn’t move faster across the rest of your cash flows. And so one of the things that we’ve done, which, you know, payroll has been our core product, we’re building out billpay revenue management is just like, can we speed up all of the cash flows of the business so that it makes sense to be able to pay people faster, to be able to pay your taxes faster, etc.? That’s a thing. The other thing that every payroll company and and payment anybody operating in traditional payment, traditional financial institutions in the United States has to deal with is the way that our tax infrastructure data trickles down to us. So the US income tax code is open source, right? Why do we have to pay for tax databases? You know why. Like why is that a thing when all the information is out there? And the answer is because it’s very difficult to consume. It’s very difficult to actually access. You have to go to every local, state, federal website, find the specific tax bracket, find where you sit in that bracket against where you filled out the data in your W-4 and be able to run those calculations. And we have now this amazing technology in large language.

Megan Knab: And so one of the things that we’ve been doing, and I think a lot of payments companies are out there doing is thinking like, how can we rebuild a lot of this legacy infrastructure that everybody else is operating on to be able to catch up to the pace of money movement that we have with stablecoins. And so one of the things that we’re doing is we’ve been training these models to be able to read and calculate,  paychecks off of the tax code that’s open source. And so, you know, there are two tax calculators in the United States that basically service 99% of payroll companies in this country. Like, can we innovate at that level as well? You know, I wouldn’t say we’re an AI company at all. I also probably wouldn’t say we’re a crypto company, like, we’re we’re a payments company. And I think it’s just, you know, innovation at one end of the stack is only interesting to a certain extent, unless you can get everything else to catch up with it. And so, you know, we’re very thoughtful about trying to think about each piece of how does a paycheck get created, how do you hire somebody, and how can we improve every level of that process?

Kevin Rosenquist: It’s interesting you said that because I remember years ago when I was working for a company and sales tax was similar. It was such a pain because the things the laws changed was because of Amazon and online shopping and all that, where you had to really focus on where the product went. And it made it mind boggling because, you know, the accounting software didn’t have an easy way to do that. And I think I had found one at one point and it was just ridiculously expensive. And we were a tiny little business. There’s no way we could have done it. So yeah, you’re right. I mean, trying to keep track of all that stuff is really impossible without tools. And you’re right, large language models are the perfect way to do it.

Megan Knab: Yeah. And, you know, there’s some level of injustice here too, right? Because we write this information out there like we should know, we should be able to access the tax code, right? We should be able to access the sales tax code, the income tax code. And it’s so obtuse in so many ways. Yeah. And so there is a big part of me that’s like, why would any like small business startup need to pay a premium to access this information that they should already be able to have at their fingertips? And so I think it’s honestly something that a lot of payroll companies are kind of coming to grips with now. There’s a lot of pricing pressure in the payroll industry where you’re making much less money per paycheck than than, you know, maybe you could 20 or 30 years ago. And a lot of payroll companies now make money by saying, okay, we’re going to integrate benefits and we get a kickback from the brokers, or we’ll integrate 401 K. And we have, you know, we take some bits off of the assets under management. And that’s really the new business model and a lot of traditional payroll companies. And it’s, you know, unsustainable I think.

Kevin Rosenquist: Do you see a place in the future where, you know, startups, new companies, crypto native businesses don’t even need a traditional bank?

Megan Knab: Yeah, definitely. I was listening to one of your earlier episodes and you asked. You’ve asked a couple of times, I think, like, why not? If you’re a fintech, why not just become a bank? And I think it’s a great question. Like why not just become a bank? And I think first of all, a lot of people have said there’s a really high barrier to entry to becoming a bank because of capital requirements, regulatory requirements, staffing. Like it’s a big deal to become a bank. And for us, you know, being the weird crypto people in a lot of areas that that we operate in is like asking a little bit of this question of like, why do you even need a bank? Like, we have created this Self-custodial payroll product where we’re never accessing your funds. We’re just giving you the logic to say, move funds from A to B to C to D to, and we’ll do the filing. We’ll provide you with the calculation. But we’re never like moving your money for you. You’re doing that yourself. And I think that is the future. I think there are a lot of obstacles to get there that we could talk a lot about.

Kevin Rosenquist: But yeah. Oh for sure. Lots of obstacles. Yeah, but it’s just an interesting thought, right? I mean, I talk about like, really kind of like flipping everything on its head, you know, like, as far as the financial world goes, that’d be wild.

Megan Knab: Yeah. You know, I was like a one day conference in New York that a stablecoin issuer was putting on, and there were all the big banks there, you know, executive directors from JPMorgan and BNY Mellon, you know, Morgan Stanley. And it’s funny to see. I mean, it’s funny for me, it’s, you know, maybe not funny in other ways, but you know, all of these guys are there and are like, okay, we know that this is a disruptive technology. We don’t know much about it. We need to learn how this is going to affect our business. And this is like the state we’re in, which is so exciting.

Kevin Rosenquist: Yeah, yeah.

Megan Knab: You know, I think that there is broad recognition that this is a disruptive technology. But what is lacking is a strategy from these larger banks that don’t want to get disrupted. They want to hold their market share. And I think it’s going to be increasingly more difficult for them to do.

Kevin Rosenquist: They’re going to resist every chance they get. They’re going to lobby like hell, right?

Megan Knab: Oh yeah. Oh yeah. Yeah.

Kevin Rosenquist: So as a founder, as an entrepreneur, what is a piece of practical advice you might give to a fintech entrepreneur that’s starting today? As far as what to think about in the next five years?

Megan Knab: Yeah, I think that there is a playbook that has worked for a lot of fintechs in the past, which is you create your own network and you have this closed network where you’re the kind of emperor managing all the transactions that take place. You know, visa, Mastercard, or maybe the most prominent ones. And I think that there is this trend towards less to, towards more permissionless ness. So rather than having a very high bar for your users to have to enter into your payments network, there will be default entry by larger shares of the market. And so this idea of creating a closed payment system that you own, and hopefully you can grow it so that you’re the market leader, I think is just not going to work in the future. And I think that we see, you know, stripe recently acquired Bridge, which is a stablecoin orchestration API company, which is a fantastic company. I think it’s them trying to keep their payments network under their own hood, you know, can we have all these stablecoin payments taking place within the stripe ecosystem? We see PayPod has launched their own proprietary stablecoin to keep their payments within their own ecosystem. I think it’s going to be tough. If, you know, if our theory of stablecoins kind of taking over financial services is correct, stablecoins can be permissionless. And so creating these closed networks is just, you know, you’re in a race to the bottom.

Kevin Rosenquist: You can’t play nice.

Megan Knab: Yeah, exactly. And building these systems that are interoperable, that are on public blockchains I think is the way to do it. And really like there’s not a lot of innovation for us really just using stablecoins. Anybody can send a stablecoin from A to B, right? Our value add is around tax reporting. And, you know, um, the UI and some of the other tools that we have around just the pure blockchain money movement. Um, and I think that there are a lot of crypto companies that are just focused on that money movement piece, and they’re kind of like missing the forest for the tree.

Kevin Rosenquist: . Yeah. You got to be open to it’ll make it a little less uh I don’t know secluded like businesses won’t be in their own little bubbles as much anymore in that situation. Right.

Megan Knab: Yeah definitely. Yeah. And if you are a business and you’re using Bill.com, you have to have all your vendors set up to Bill.com. Like that is going to be a thing of the past, right?

Kevin Rosenquist: Yeah. Which is good because that was always really annoying.

Megan Knab: So annoying.

Kevin Rosenquist: Yeah. All right, well, Megan Knab the company is Franklin. Really appreciate your time. Thanks so much for being here.

Megan Knab: Thank you so much for having me.