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SoftPoS stands for Software Point of Sale. If you lived in parts of the world outside of the US, you would have come across contactless payments. It made the payment experience seamless and almost invisible to the customer. As a result, in the UK for instance, by Q4 2018, contactless payments took over chip and […]
The post Will SoftPoS be the new global payment mechanism? appeared first on Daily Fintech.
Poor existing banking infrastructure? No major Unicorns from the local ecosystem? – No problem. The rise of Vietnam as an innovation/Fintech hotbed is a fascinating trend. A tech savvy population, supportive government regulations, and high smartphone penetration – a great combo that has done wonders to several countries across the world. Image Source Vietnam ranks […]
The post The Rise of Vietnam – the new Asian Innovation hub appeared first on Daily Fintech.
If you joined the Fintech party only this year, and feel you missed on riding the curve – don’t worry. Sub Saharan Africa is where all the Fintech excitement is at the moment. In 2018, Fintech investments in Africa quadrupled to $357 Million. Image Source This is tiny compared to the Billions being invested in […]
The post $144 Billion value to Sub Saharan Africa – Mobiles lead Fintech for Good appeared first on Daily Fintech.
Late stage venture capital deals and funding have been growing rapidly over the last three years. The most recent European Fintech to hit the headlines with yet another multi-Billion dollar valuation is Klarna. The “Buy now Pay later” payments company raised $460 Million at a massive $5.5 Billion valuation. My immediate reaction to the numbers […]
The post Klarna’s $460 Million raise and US ambitions – is an IPO coming? appeared first on Daily Fintech.
Image Source He was the architect of Aadhaar – a biometric identification database of 1.3 Billion Indians that was put together in just over a couple of years. Nandan Nilekani, the co-founder of Infosys, is now back in the headlines discussing India’s “Account Aggregator”. An open banking-isque concept, Account Aggregators (AA) would consolidate financial information […]
The post India embrace “Data Empowerment Architecture” with Account Aggregator appeared first on Daily Fintech.
There is ample evidence that 3 is a magic number. It dates back to the old times and is well captured in the Latin phrase[i] Omne Trium Perfectum – everything that comes in 3s is perfect. I bring this up not only because I chose to provide three examples in my post today but also […]
The post Convergence as a trend in the re-bundling phase of financial services appeared first on Daily Fintech.
Governance, Financial Inclusion, India, Tier 3 economies, remittances, payments, currencies, tokens, coins,…
These and more terms have been tossed around over the past few days, as we consumed facts and interpretations, triggered from the Libra white paper and all the related communications around it. As the dust settles down from the initial reactions, there are several overlooked aspects of the LIBRA plan that merit looking into.
Confession No. 1
There has been an explosion of cynical, partisan, and hyped threads of discussion. I include myself in the humans that reacted rather emotionally to the communication of the LIBRA plan. My `button` was pushed when the `financial inclusion` intention seemed to be the branding and PR storyline.
Dr. Cathy Mulligan and her collaborators called for caution in their Digital Cooperation report for the UN High-level panel (UNHLP) about using vulnerable communities to experiment on with #digitaltechnologies. Of course, `experimenting` is subject to interpretation and in the case of Facebook, maybe they can argue that this will be their second attempt in financial inclusion – as they did attempt to launch in the booming Indian market to offer seamless, cheaper payments like in any messaging app. Admittedly, payments are the very heart of any economy and we do live in a world that customers expect payments to be like WhatsApp messages[1].
Confession No. 2
We are not ready yet for DAOs. Thomas Power, rightly says that we need a Face to each and every scalable unicorn (every system needs a Face, at 8:30 BloxLiveTV). And the truth is that there is a problem with the Face behind Facebook, even though #DeleteFacebook led nowhere.
However, sentiment is not on our side, on this one. We, the ones that don’t forget Cambridge Analytica, fake News, propaganda, and what Chris Hughes or Sean Parker or Chamath Palihapitiya said; we are outnumbered. Let’s admit it.
The masses that send and receive remittances, and the masses that spend online to buy inexpensive items – micropayments – value access and convenience. While we, the ones that have a problem with the Face, are in another phase altogether, with more choices and the luxury of discussing governance, social responsibility, public scrutiny etc.
We have to acknowledge that foundations and associations (two different legal entities) setup in Switzerland have credibility and thus, the registration choice for LIBRA association. However, we need to also admit that this Swiss branding that has been deployed in another `alternative` use case – to accommodate legally the needs of blockchain startups to launch ICOs – still has to prove itself in the governance field and in the ways it links to the for-profit businesses that are their raison d` ȇtre.
As Kathryn Haun, general partner at Andreessen Horowitz (one of the 28 founding members) pointed out[2], the Libra Association, will focus on governance issues debating decisions around how the new digital currency will be overseen etc. Swiss associations and foundations are not legal structures that were meant to spearhead such large business initiatives and that is the reason that Kathryn Hauna says “I think of it as a constitutional convention; you have all these different states coming in trying to form this union.” Dianne Schepers, a legal executive, explained to me that foundations are supervised by the Swiss Federal Supervisory Board for Foundations (ESA) and are required to be registered in the commercial registry and provide an annual report. Associations are not subject to any of these requirements.
As the 28 founding members will be discussing governance and much more about LIBRA, I feel that the composition of this association was overlooked (as other more basic items needed tending). It was actually – and rightly so – welcomed and the sentiment was positive because it has a decentralization flavor to it.
Confession No. 3
One of my first emotional reactions while reading the facts reported from Verum Capital – Your guide to Libra – on the day it hit the market, was to ask three questions:
Q1: For how many of the 28 founding members has financial inclusion been their business?
Q2: How many of the founding members have unsuccessfully experimented at scale in financial inclusion?
Q3: Which organizations were invited to consider being a founding member? And who decided this?
I share with you today my initial findings (more research and patience is needed to address them all) from looking closer to the founding members that each `coughed up` $10million
There are 7 members from the financial sector and most of them need no introduction.
Discussing the composition of the founding members with Verum Capital, it became clear that none of the top 5 remittance players were invited. Xoom ranks 6th and was bought out by Paypal in 2015. LIBRA has included the 6th global remittance player as a founding member.
Source: SaveOnSend.com
There are 4 members from the Blockchain space. Coinbase and Xapo, need no introduction. I do confess that I had to check out the others. BisonTails was only setup in Oct 2018 in the US to focus in blockchain interoperability and has only $5.3mil in seed funding[4]. Anchorage is a US start-up launched in 2017 focused on digital asset custody for institutional investors with a Series A funding completed (total funding $17mil).
Where did Bison Trails find the $10million membership fee to participate in the LIBRA association? Why did Anchorage decide to spend 60% of its total funding up to date, on its LIBRA membership?
There are 4 members from the VC world, which a priori seems a sector weight that I cannot rationalize (help is welcome; please comment).
Source: Ribbit, A16Z Lead Fintech Unicorn Hunters, CB insights
Andreessen Horowitz is an investor in Bison Trails (one out of seven) and a lead investor in Anchorage. Thrive is family to the Facebook family. USV is family to Coinbase, and on and on.
Three out of the five top VC are founding members of the LIBRA association. Top VCs can be measured in several ways. What is more relevant here is their Fintech footprint.
There are 3 members from the e-commerce space. Ranging from travel, to luxury fashion.
Two online hailing businesses and one music unicorn
Two telecoms with Iliad being a founding member that is losing clients and revenues but has a founder and still majority shareholder (billionaire Xavier Niel) who loves challenging the corporate establishment and is the founder of the StationF, one of the biggest startup campus.
There are 5 members that are non-profit organizations:
Wrap up
Confession No. 4
I continue to look into the issues raised by the boldness and the potential of the Libra coin (which has huge regulatory risk). LIBRA has actually a huge PR and branding problem, as even the MIT Tech Review article and many more, refer to the LIBRA Stable coin as the `Facebook coin` Facebook’s Libra: Three things we don’t know about the digital currency.
David Marcus, spearheading the Libra project for Facebook, had to denounce rumors that the $10 million buy-in got the validating firms access to transaction data (Decrypt).
There are 28 seats around the LIBRA table for now (similar to the way Stellar started off with 30 nodes). The LIBRA coin is not a Facebook coin. However, governance in an association is legally non-existent. So, for now we need to be clear that it is in good faith and only by giving the benefit of the doubt, that the LIBRA association has a dream and we should be watching their execution closely.
David Siegel through his new endeavor Cutting through the noise shared several facts and insights on LIBRA, as he is excited about the potential of a Stable coin that can scale fast as it will be launched in established markets. LIBRA will be offered to all users on Facebook, Booking, Lyft, Paypal, Farfecth, …..
During his webinar on Saturday (recording on youtube) I learnt that 60% of votes are needed in order to make a change in LIBRA. I like to think of this as the 60% attack nightmare.
Can Facebook pull off a 60% attack?
As Bernand Lunn said to Swissinfo.ch the day after, in What does Facebook’s Libra cryptocurrency aim to achieve?: “Facebook has been hugely successful making money from accumulating people’s data and then selling it. It’s hard to see them completely changing their stripes.”
How will the LIBRA association untaint the LIBRA coin so that it is not thought of as a Facebook coin?
[1] Excerpt from `Money is a claim on an Institution and the reason for change`, Efi Pylarinou
[2] Andreessen Horowitz: How Facebook’s Libra Cryptocurrency Will Be Governed
[4] Source from Crunchbase
Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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2016 was a pivotal year in India’s digital economy. Demonetization was deemed a execution failure by many experts. However, it has triggered a digital payment boom in the country. In the last two years, transaction sizes in India have grown 50 times to $2 Trillion (143 Trillion INR). Some claim demonetization wasn’t the reason for the payment boom. If not causation, there is definite correlation between the two.
When we talk about Asia Fintech/Payments, China’s $40 Trillion market perhaps takes precedence over the other economies. However, if India continues to grow at the current pace, we may see yet another leap frogging Asian Fintech economy. I must confess, I was pretty excited when I first read about the 50X growth of the payments market.
Several global players have set up shop in India. Google, Amazon and Alibaba have all taken part in the payments boom in different ways. While these tech giants keep clashing, the Indian government has led the way in setting up the core infrastructural elements through the Unified Payments Interface (UPI). This is perhaps one of the few instances where a government has pioneered innovation at this scale.
I recently spoke to Elizabeth Chapman, CEO of ZestMoney – a fintech lender in India. As a Westerner, now running a startup based out of India, she is perhaps best suited to assess the developments there, especially in comparison to the west. There were two key developments she was very pleased about.
One, getting a digital identifier for 1.3 Billion people. Getting the Aadhaar programme up and running in under two years, was no mean feat. The data base has been linked to several governance aspects, like tax for example. The other development Liz was impressed about was the UPI, which has catalysed the payments boom.
Now coming back to India payments, Facebook is a key player. Whatsapp payments was tested with a limited audience in India. While the uptake was very good for the functionality, regulatory support was missing. The Reserve Bank of India (RBI) initially came up with a rule that customers’ payments data can’t be stored outside of India.
The Government of India also imposed a rule that any data classified as critical personal data cannot be stored outside of India. Most international technology firms have expressed their dissatisfaction with these data protection rules. One of the key reasons why Whatsapp Payments didn’t take off in India was because of this rule.
In an emerging markets context, consumers care less about data protection and privacy. As long as they get to be part of the banking system and the financial ladder, getting paid is all they care about. Which is why QR codes and PayTM wallets have become so commonplace on Indian roadside shops.
In a recent Linkedin conversation, one of the comments were about decentralised ways of storing assets in a wallet. It is a great concept in the west, and I love to talk about it till the cows come home. However, this was hyped as a great development in an emerging markets context. I don’t believe that is true.
Emerging markets consumers DO NOT care about decentralisation. I am not talking about the college graduate in south east Asia who is writing a Blockchain and has 10 different wallets to store cryptos.
I am talking about the lady who is selling the turmeric in the picture above. All she cares about is an easy way to get paid, so that she can cook dinner for her kids, and pay their school fees. They care about how inflation could take away all their wealth in Latin America and parts of Africa. Therefore, a solution that solves their day to day problems will see massive uptake.
We have already seen the rise of digital payments in India. With the removal of these data localization rules by RBI and the Government of India, there will be more explosive growth. With Facebook’s Libra (Sorry, couldn’t help mentioning it) around the corner, getting rid of the data localization rules, may not necessarily be a bad thing.
For Facebook, India is the biggest market – be it based on population or internet growth, or middle class income or financial inclusion. All the metrics point to India for Facebook.
For me, Financial Inclusion comes ahead of Data Protection. We thought Identity with Aadhaar – we didn’t think decentralisation. Let’s get them all on to the next generation payment network, get an economic identity created for them. Data protection, privacy and decentralisation will soon follow as awareness of the risks of the digital economy becomes more prevalent. For now, let us just help the lady selling the turmeric get paid.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
The Daily Fintech SmartExpert Service is an easy engagement model for our advisory services. Now you can start working with us by simply choosing your expert, paying for the hour and scheduling your call with the Expert.
In this post we unpick that simple phrase “paying for the hour” and explain why we decided to innovate on that front by partnering with one of the next generation of StableCoins for payments rather than simply using the credit card rails and what we learned from that experience. We like to write about payments innovation. With this partnership we are testing our theories in the laboratory of the real world and making that experience available to our readers.
In this post we will describe:
For our big picture view on why StableCoins are so important (but also so hard to get right), please read this update to The Blockchain Economy digital book that was published on Saturday.
Why we are using a cryptocurrency for payments, rather than relying on the legacy credit card rails.
First, we do offer legacy credit card rails as an option. If you are not comfortable using cryptocurrency, just use Paypal.
Second, we like to test our theories in the laboratory of the real world. Back in April 2017 Daily Fintech articulated the thesis that Bitcoin Will Move From Darknet Early Adopter Niche To Clearnet Mainstream:
“This will happen first among free agent, knowledge workers who offer digital products/services cross border.“
“Free agent, knowledge workers who offer digital products/services cross border“ describes the Daily Fintech SmartExpert service. Now it is time to test that theory in the laboratory of the real world.
Third, it just makes practical sense in a borderless world for DailyFintech’s global subscribers and Experts. Once you really look at how cross border payments work using legacy bank and credit card rails, you see three big practical problems:
Our theory is that change will be driven by Merchants not Consumers, because Merchants have the motivation. We decided to test this theory by offering payment for the Daily Fintech SmartExpert Service using a StableCoin.
Why use a StableCoin rather than Bitcoin or any other Tokenomics funded cryptocurrency.
in a word – volatility. When we first started thinking about how to do this, we planned to use Bitcoin and we created a clever (but, in hindsight, overly complex) way to deal with the volatility problem. When we discovered StableCoins, we saw that we did not need a complex way to deal with the volatility problem. The complexity of explaining how we dealt with Bitcoin volatility would have created friction that would have impeded the chances of success for the Daily Fintech Expert Service.
So much for Bitcoin. What about all the Altcoins that offer quick, low cost payments? They solve the speed and fees problem very well, but they do NOT solve the volatility problem. Any cryptocurrency that is funded through Tokenomics has an inherent volatility problem. The venture and their early investors want the price of the coin to rise and some traders bet against it rising; the push and pull of these bulls and bears creates volatility.
What is needed is something that is a) a cryptocurrency b) non-volatile by design. In short we need a StableCoin. For more on Stablecoins, please see this chapter of The Blockchain Economy Book
The next question was – which StableCoin?
Why we chose the GLX StableCoin
GLX is a StableCoin issued by a company called Globcoin.
We chose the GLX StableCoin for 5 reasons:
In fact, in full disclosure, I like Globcoin so much that I agreed to join their Board and help make things happen for them.
What we learned during this project.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.
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$41 Trillion was the size of China’s mobile payments market in 2018. It is perhaps counter-intuitive when the payments market is more than three times the size of China’s GDP ($12 Trillion). That’s because GDP is based on value creation, not on transaction volumes.
Let me explain it with a crude example. A couple of weeks back, two of my friends and I went into a sports shop in Chislehurst, and bought a cricket bat for £240 for the summer. We knew we were going to share the costs at £80 each. I paid the shopkeeper £240, and then my friends paid me £80 each.
While the value created/exchanged in this case was for £240, payments happened for £240+£80+£80 = £400. GDP is calculated based on the £240, and payment volumes would account for £400.
In the initial days of my discussions about China Fintech, I would often praise China’s Fintech businesses as perhaps the largest in the world. China is doing Trillions in mobile payments, and the US is still groping its way towards $200 Billion. Purely from a size perspective China is light years ahead, but the business models there are different.
Fintech is used as a business model by lifestyle firms in China and broadly Asia. Fintech is not their core value proposition, at least it is not until they onboard a few million customers. Their core lifestyle business is then augmented by Fintech services for their customers, and that makes their life style business stickier.
I have touched upon this in detail in one of my previous posts on how lifestyle businesses have evolved into Fintech heavy hitters in Asia. And payments is the lowest common factor between ecommerce/lifestyle businesses and financial services. Therefor, firms like Alibaba, Tencent, Grab and Bykea have integrated payments to their core service offering.
However, the Chinese tech giants have identified that it was time to upgrade from payments into banking. Earlier this month Alibaba, Tencent, ZhongAn and Xioami were granted a virtual banking license in Hong Kong.
Alibaba applied for a banking license for its Ant SME services, which is a subsidiary of Ant Financial. Tencent and Xiaomi did a Joint venture to go for the banking license. Xiaomi is the fourth largest mobile phone manufacturer in the world with over 120 Million smart phones in 2018.
When Amazon began offering lending to its SME base, there were headlines that they would soon go for their banking license. However, the trend these days is that the East would lead and the West and the rest would follow. Now that China tech giants have upped the ante with a banking license, would the US peers respond? Watch this space.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).