Enabling super apps; Trends and the future of embedded finance; A taxonomy of different types of DAOs;
In this edition:
1️⃣ How close is a Meta Pay to becoming a wallet of metaverse?
2️⃣ Borrower bails out its lender?
3️⃣ Whither Britain’s crypto masterplan?
4️⃣ A taxonomy of different types of DAOs
5️⃣ Emerging presence of big tech in financial services
6️⃣ Enabling super apps
7️⃣ Trends and the future of embedded finance
8️⃣ Banking Circle to put USDC stablecoins onto its payment rails
How close is a Meta Pay to becoming a wallet of metaverse?
In one of my last posts I mentioned that Meta was little late in wallet market in comparison to other big techs. However, Meta Pay is aiming at web3 world while others focus on fiat for now
FXC Intelligence asked a great question does Meta Pay work in the metaverse?
At present, the newly renamed Meta Pay allows users to make purchases, send money and donate to charitable causes on Facebook in all the countries it serves, as well as Instagram in several territories and WhatsApp or Messenger in a small number of additional markets.
Meta Pay’s rename has not yet come with additional features, although Mark Zuckerberg did outline future additions in a Facebook post, saying the company was working on making it “a wallet for the metaverse that lets you securely manage your identity, what you own, and how you pay”.
He said that the future wallet would include the ability to store digital metaverse items such as clothing, art and music, suggesting it will have the ability to store NFTs. However, he did not provide a timescale for when such features would be added.
As it stands, Meta Pay remains outpaced by some of its rivals in a number of ways. In ecommerce, while PayPal, Apple Pay and to a lesser extent Google Pay are widely accepted online, Meta Pay remains largely limited to its own ecosystem of websites and apps. There has been an attempt to move beyond this, such as with a partnership with Shopify, but Meta has far more work to do if it wants to take a sizeable slice of this market.
Notably, the service does not currently include the ability to hold either fiat currency or crypto, with recipients of P2P payments needing to add a card in order to receive money they are sent. By contrast, PayPal has this service natively, while Apple can support this in some markets with the use of Apple Cash. Apple also has the ability to store documents such as tickets and passes, which Meta Pay currently does not support.
It seems that Meta has decided to focus on creating a new market for Meta Pay to dominate — the metaverse — rather than focusing on taking share of the highly competitive current market. However, for that to pay off, the metaverse not only needs to take off, but Meta needs to successfully establish itself as the payments platform of choice in the space, despite competition from the crypto arena.
I think even though Meta was late with it’s resources it has a very good chance of becoming a leading payment method in metaverse given everything is done correctly.
On the hand the company will still need to go to outside metaverse and work with fiat world because it still dominates the world of finance as most the financial activities take a start of ramps. Another argument here is not everyone has access or equipment to dive into the metaverse.
Source FXC Intelligence & Personal opinion
Borrower bails out its lender?
Did you know Sam Bankman-Fried’s Alameda Research owes bankrupt Voyager $377M? This crypto shows that so far it is mostly crypto firms with crypto firms doing business with one another. As a result when on collapsed it started to pull down others with itself.
According to Decrypt Alameda Research, the firm founded by crypto billionaire Sam Bankman-Fried that last month extended a $500 million line of credit to crypto broker Voyager Digital, itself owes the company $377 million, according to Voyager’s Chapter 11 bankruptcy filing.
It’s an unexpected revelation that’s come to light by way of a bankruptcy that’s seemed like a foregone conclusion since Voyager disclosed that hedge fund Three Arrows Capital owes it more than $600 million.
A table on page 13 of the bankruptcy filing, which was submitted in a New York district court today, shows that Alameda Research owes Voyager $377 million at an interest rate of 1% to 5%. The outstanding balance includes a $75 million unsecured loan, according to a list Voyager’s largest unsecured claims on page 119 of the filing.
Alameda Research did not immediately respond to a request for comment from Decrypt.
Alameda’s debt makes it Voyager’s second largest borrower after the insolvent Three Arrows Capital, which also goes by 3AC.
When the extent of 3AC’s trouble became clear, largely because of $200 million it lost in the Terra collapse in May, its lenders began to realize that huge 3AC loans on their books were about to go into default.
Once 3AC was no longer able to make payments, Voyager issued a default notice last Monday. Then, on Wednesday last week, a British Virgin Islands court ordered 3AC to liquidate. That means 3AC must cease all operations and allow the court to oversee the selling of its assets to offset what it owes creditors, including Voyager Digital.
It’s worth pointing out that Sam Bankman-Fried, founder and CEO of cryptocurrency exchange FTX, has a vested interest in seeing Voyager made whole. At one point, Alameda and its venture arm,
Alameda Ventures, were the single largest Voyager shareholders with 11.6% of all outstanding shares, according to a June 17 press release.
At the time, Voyager stock was trading at just over $1.
A week later, on June 23, Alameda announced in a press release that it had surrendered, or returned in exchange for no money, 4.5 million of its shares. Those shares were worth $2.6 million at the time and VYGVF was trading at $0.56 per share.
Alameda’s share surrender brought its stake in the company to 9.49% — just below the 10% threshold that would have made it an “insider” in the eyes of the U.S. Securities and Exchange Commission. This is the same SEC rule that required Tesla CEO Elon Musk to disclose his stake in Twitter in April, ahead of making an acquisition offer.
On Wednesday afternoon, after the Toronto Stock Exchange suspended trading of Voyager Digital’s stock, it ended the day trading at $0.27.
Source Decrypt
Whither Britain’s crypto masterplan?
According to Financial Times global Britain’s position at the cutting edge of crypto was plunged into doubt this week following the shock resignations of chancellor NFT enthusiast Rishi Sunak and city minister fintech bro John Glen.
It was only last week that Sunak was extolling crypto’s potential benefits at the British Chambers of Commerce’s annual conference, where according to The Telegraph he told attendees that championing digital assets remains “the right thing for the economy”:
Mr Sunak said the underlying technology supporting crypto assets could be “completely revolutionary”, but admitted “we don’t exactly know” the potential uses. . . .
“There’s lots of opportunity there. We don’t exactly know, in the same way at the beginning of the internet, we didn’t exactly know that 10 years later we’d all be using Uber or whatever it was.
“So I’m excited about that. I want to make sure that this is a place which is welcoming of that innovation.”
Five days (and another sexual misconduct allegation) later, the Conservative party’s crypto dreams look to be in tatters.
Following Sunak and Sajid Javid out the door on Wednesday was city minister John Glen, who said in a speech in April that he wanted the UK to be “the very best place in the world to start and scale crypto-companies”. (The Tories had received a $500,000 donation from crypto investor Christopher Harborne two months earlier.)
Glen continued: But what I mean is the extraordinary, mercurial, underlying technology which makes ‘crypto’ possible… and which we can be pretty sure is going to have profound effects across multiple domains.
And that doesn’t happen very often. It’s a challenge… and it’s an opportunity… and today I want to tell you how here in the UK we’re going to respond. Because we want this country to be a global hub.
That message seemed to animate the British Army, which this week appeared to launch a daring but short-lived partnership with a group of NFT developers supposedly impersonating another group of NFT developers calling themselves “The Possessed”.
It’s now unclear when exactly the Treasury’s push into the NFT market will bear fruit. You might remember that during the same speech, Glen confirmed that Sunak had asked the Royal Mint to create its own token “to be issued by the summer”
When FTAV asked the Royal Mint for a progress update, their press office replied that it was “continuing to develop” its NFT and that “further details” would arrive in due course.
With Sunak and Glen both gone and the army’s Twitter account restored to its former lustre it will likely fall to another governmental crypto doyen to continue fighting the good fight — turtleneck and all.
Source Financial Times
A taxonomy of different types of DAOs
Categorizing DAOs is challenging. All DAOs operate based around digital assets, which may be desirable for their financial value, but
not all DAOs are themselves oriented towards making money; some are even designed to give it away.48 A DAO may begin with one goal, such as collective investment in NFTs, and then morph into a community, a grants organization, a sponsor of creative work, an incubator of entrepreneurial ventures, a trading platform, or anything else. Some DAOs begin with a well-defined objective, while others are more diffuse from the start.
Nonetheless, at any moment in time, a DAO will generally have a predominant goal. This may be established in founding documents, such as an explicit “constitution”, or it may be articulated
more informally. DAOs associated with operational protocols, such as DeFi DAOs (e.g. Synthetix, yearn.finance, dYdX), are connected in some way with the objectives of that protocol. While some DAOs are more focused than others, this is also true of corporations. Some conglomerates span many industries and startups that pivot through multiple business models.
We divide DAOs along two axes. First, what is their primary objective? Do they seek to create something new (including wealth), enhance the functioning of a community or society, or achieve a specific goal and then disband? Second, what are the means they use to achieve that objective? Do they seek to manage some activity, deploy capital, or organize people? This produces a three- by-three matrix of major DAO types.
Source: World Economic Forum
Emerging presence of big tech in financial services
According to Oliver Wyman big tech competition in financial services is going to accelerate with the launch of powerful wallets and the growth of embedded finance.
Big tech companies are customer platforms organized entirely around connected customer data and value technology. In some cases (such as Facebook and Google) the end purpose was originally to monetize customer attention and data to sell advertising. In other cases (eBay, Amazon) the end purpose was commerce.
However, as the business models in big tech are converging, Oliver Wyman anticipate that a far greater penetration into financial services will be one of the consequences. We outline three of the big shifts in this convergence:
Moves into commerce with wallets at the core.
Meta/Facebook has been vocal about the importance of its launch of the Novi wallet to support its move into commerce, allowing it to facilitate commercial transactions of individual and ultimately corporate customers through tying together analysis of needs, marketing of options, transaction logistics, payments, credit of one form or another, cashflow management, and settlement. It’s likely that other big techs will follow suit, and it’s not hard to imagine that once all big tech firms offer customers a wallet and have access to a deeper understanding of spending and earning trends that a move into wider lifetime financial management for individuals and transaction services and treasury management for companies will follow.
Connected data ecosystems with embedded finance.
Big tech companies are moving heavily into the internet of things and are looking to own connected data ecosystems that will increasingly need to have embedded finance built from the ground up, be that mobility data solutions built around cars, wearables for health management, management of climate footprint and energy costs through active energy usage tracking, and many other examples.
The race to build the Metaverse.
Most big tech firms are betting the Metaverse is the next big thing, and value from the Metaverse will be based on what people actually do there, rather than bringing people there to advertise to them. So the route to monetizing all the investment in virtual technology and the Metaverse is much more likely to have embedded financial services built ground up from the start. You don’t need to be a Metaverse-missionary to see the huge potential here. For example there are an estimated 2.9 billion active gamers in the world, and most of this population are already engaging with the Metaverse. Whoever has brought them there or controls their surroundings has their attention, and with the blink of an eye, literally, those users will be able to buy products and services via seamlessly embedded financial services.
Source Oliver Wynam
Enabling super apps
According to Mastercard there has been debate over the super app model and whether this is the best way for apps and brands to grow. Some super apps like WeChat or Grab launched with a single service before extending their fulfillment capabilities and bringing in 3rd party providers. Other apps like Tencent, Alibaba Group, and Amazon began as marketplaces matching buyers and sellers before venturing into new categories or services.
Major brands have also made efforts to go direct-to-consumer. While some brands use their super apps and marketplaces to reach customers, others have invested in improving their websites, launching apps, or creating ‘official online stores,’ even within other e-marketplaces.
In emerging markets, where we find low market maturity and few established players in any category, early movers have been more adept at leveraging technology and pushing hyper-localized offerings than many e-marketplaces in more developed markets. Whether apps expand through their dominance of a particular category or via a marketplace platform, they usually share a need to operate and function smoothly as a mobile-first, all-in-one offering. eMarketer reported that smartphone users in the US spent 4 hours on the internet per day in 2020, with 88% on apps, not browsers.
This focus on time spent in-app is crucial for super apps as brands seek to extend their engagement with consumers, regardless of whether it adopted the strategy of a single provider fulfilling all categories or as a tech-enabled marketplace convening various sellers.
The social media phenomenon
Social commerce is often catalyzed by online relationships, whether with friends, family, influencers, or business. Social media can strongly influence purchasing decisions because the interaction is more personal and can be tailored and individualized. It is no wonder that a recent poll showed over 70% of businesses surveyed rely on social media for engagements, where it was the preferred channel.
Another aspect of social commerce driving the super app trend is the circular nature of the buyer’s journey — a good purchase experience typically builds trust and encourages returning business. With increased reliance on the overall customer experience, apps can expand their relevance across multiple customer journeys that target consumers — from transport and travel to shopping and groceries.
Source Mastercard
Trends and the future of embedded finance
Predictions by Finch Capital
1. Payroll API is the next big thing
Payroll APIs will allow financial product providers almost guaranteed payments at lower interest rates on the basis of “writing” their deduction into the payroll. With the recent surge of the consumer price index, the need from employees for payday loans could also increase.
2. The days of the credit card are numbered
BNPL could become even more appealing to customers with their low- to no-interest offering as credit cards increase their interest rates. This will be compounded by lowered barriers to running card issuance programmes as alternative lenders like BNPLs find other ways to extend their reach outside of merchant checkout page integrations.
3. Embedded finance as a way to fight valuation pressure
Recent times have increased the pressure on tech companies’ valuations. Platforms and marketplaces will accelerate the adoption of embedded finance features as a way to monetise and generate more revenue;
4. Fast invoice platforms could save businesses from insolvency
Rising costs put businesses under pressure which increases the risk of payment delays and defaults. Invoice finance and funding APIs could solve this problem and improve the resilience of businesses struggling to get paid and pay suppliers and workers in time.
5. Neobanks are entering uncharted territory
The neobanking industry was born in a low-interest-rate environment where challengers could compete on customer-journey automation, personalisation, and predictive analytics. With rising interest rates, high-interest savings accounts offered by traditional banks coupled with BaaS features could look more attractive than ever to customers, and only the most feature-rich neobanks will win.
6. Embedded insurance is gaining momentum
P&C insurers are suffering from margin squeeze from inflation, increasing claims costs ahead of premium growth, and this is exacerbated by the loss of revenue from a low-interest-rate environment. The knock-on effect is that this further increases the imperative of growing distribution scale and reducing marginal costs of distribution through less price-sensitive embedded channels.
7. Wealth tech’s resilience will be challenged by the bearish market
With the stock market going down along with the digital asset market, retail investors and high-net-worths might increasingly turn to wealth-technology solutions to customise their investing strategy and help recover their recent losses.
Personal opinion
I do not agree with prediction number 2 because it is a long way for BNPL to reach the level of the credit cards let alone overtake them. BNPL is going through a very strong market downturn and very few of the companies could survive. On the other hand credit cards according to TransUnion 50% of “credit-active” Gen Z (18 to 24 in 2019) in the U.S. have a credit card.
Source Stripe & Personal Opinion
Banking Circle to put USDC stablecoins onto its payment rails
Banking Circle, the tech-first Payments Bank, is shifting the dial in the virtual assets market with a ground-breaking new service for Banks and Payments businesses. By adding USDC stablecoins to its payment rails for payment acceptance, processing and settlement, Banking Circle is delivering an easy to implement solution that cuts out the need for significant IT or financial investment for businesses that want to get into the web3 market. It is a key step in democratising global finance.
“Digital assets are likely to be the ‘leveller’ for the global economy in years to come with potential to remove the friction that is inherent in conventional currencies”, explained Mishal Ruparel, Head of Virtual Asset Services, Banking Circle. “It’s critical, therefore, that Banks and Payments providers have the ability to process certain types of cryptocurrencies in the same way they do fiat currencies. With an already established reputation as an innovator in payments, it’s a natural next step for Banking Circle to add stablecoins.
“We already have client demand for paying out in cryptocurrency, which they want to do in a way that is trustworthy and lower risk. We will, therefore, provide the facility to convert fiat to stablecoins in USDC, giving financial institutions the ability to send funds in stablecoin easily and with full regulatory compliance.”
Banking Circle’s choice of asset backed stablecoins for its move into the web3 market reflects their stability against fiat currencies, giving Banks and Payments providers the ability to facilitate payments outside traditional bank rails. The reconciliation, speed and cost advantages are significant. With connections into crypto liquidity providers such as Coinbase, Banking Circle will act as a bridge between fiat bank accounts and stablecoins which offer faster settlement than fiat transactions without any of the correspondent bank and network fees.
“Banking Circle is committed to delivering payments solutions that are fit for purpose and future-proofed”, added Mishal Ruparel. “This latest addition to our payment rails is an important step as we grow our super-correspondent banking network, giving Banks and Payments businesses the ability to step outside the traditional correspondent banking model and extend their offerings.”
Personal opinion:
Recently I wrote that banks were safe in this crypto winter but the question was for how long. As demand from customers increases banks and traditional financial institutions will have to go into crypto and what could potentially save them from the negative cases that are happening in the market? I believe it is strong regulation and compliance requirements could be one of the ways the prevent traditional financial companies from the fate of their peers in the crypto world but regulations seem far war away.
Source Banking Circle and Personal opinion
