Fintech stock prices plunge; Russia’s fight against bitcoin; Open finance use case: Payments; The blockchain trilemma;

Perspective for today:

  1. Fintech stock prices plunge
  2. The future of Google Pay
  3. Russia wants to ban bitcoin
  4. Several altcoins have suffered worse losses than the crypto market leaders
  5. Open finance use case: Payments
  6. The blockchain trilemma
  7. Payment facilitators show signs of slowing down
  8. Crypto, DeFi and Disruption

Fintech stock prices plunge

Among recently public fintechs, more than a dozen fall into the category of “truly terrible performers” — with shares trading far below their initial offer price, according to an analysis of Crunchbase data.

First, we’ll look at the worst performers. This isn’t schadenfreude so much as a reflection of the fact that there are a lot of them.

To start, we compiled a list of companies that went public in the past five calendar quarters and had shares trading 30 percent or more below their initial offer price last week.

The list is heavily populated by companies that took the SPAC route to market in lieu of the traditional IPO roadshow. A lot of funded companies that completed SPAC mergers have been exceptionally poor performers.

This includes some fintech SPAC deals, including MoneyLion, a mobile banking provider, and Bakkt, a platform for managing crypto and other digital assets.

Big name offerings that took the traditional IPO route, however, also rank among those that have fared poorly. For instance:

Robinhood, the zero-fee stock and crypto trading platform, has presided over a particularly steep fall in its share price. The company priced its IPO shares at $38 each in July; they were recently trading around $15.

Marqeta, a heavily venture-funded card issuing and transaction processing platform, priced shares for its June IPO at $27 each. The Oakland-based company was recently trading around $13 a share.

Some fintechs have fared better. Examples include:

Shares of Affirm, the buy now, pay later financing provider, are up about 50 percent from the company’s initial offering price a year ago, with a recent market cap around $18 billion. That’s still a strong track record, even though they have shed over half their value from peaks hit in the fall.

SoFi, the online lending platform, is up a bit from the initial trading price after the company completed its SPAC merger in June. With a recent market cap around $11 billion, it’s still fairly highly valued, even though shares are far off their peak.

Coinbase, which opted to go public through a direct listing, has seen much of the early exuberance around its April market debut fade, but still maintains a market cap around $58 billion. The company set a reference price of $250 per share for its debut, but saw shares actually open at around $381 each. Recently the stock was hovering around $222 per share.

And then, there’s Upstart.

Upstart, a Silicon Valley-headquartered online loan provider, has seen shares more than quintuple in value since the company went public in December 2020, giving it a recent market value of more than $9 billion. It’s likely helpful that Upstart, in contrast to most of its recently public fintech peers, is profitable.

It seems odd to some degree that fintech continues to be the reddest of red-hot sectors for venture investment.

Source.Image source.

The future of Google Pay

Google has hired former PayPal executive Arnold Goldberg to run its payments division and set a new course for the business after it scrapped a push into banking.

The move is part of a broader strategy to team up with a wider range of financial services, including cryptocurrencies, said Bill Ready, Google’s president of commerce.

Given Google’s dominance in search and other online services, it was long expected to shake up the world of finance. But it has little to show for its efforts so far. Google Pay has gained some traction in India, but struggled elsewhere. It lags well behind Apple’s payment platform, and Google hasn’t created its own credit card or financial products the way Apple has.

Google debuted its payment app in 2015 and revamped it in late 2020 as a hub for consumers to track expenses and hunt for discounts. At the time, the company shared that the app had 150 million monthly active users globally. But Google’s wallet faces tough competition, even on devices that run its Android operating system. Samsung Electronics, the biggest seller of smartphones, has its own payment system.

The company is integrating payments more tightly with Google’s shopping efforts, such as a feature that shows consumer loyalty cards and personal discounts directly in search results. Google also is trying to position itself as more welcoming to merchants than Amazon. In 2020, Google eliminated fees for retailers selling on its shopping service.

Tiptoeing into crypto also could help Google entice users. Google has partnered with companies, including Coinbase and BitPay, to store crypto assets in digital cards, while still having users pay in traditional currencies.

I believe Google will move into crypto as there is demand for this service.


Russia wants to ban bitcoin. Let’s see how it has gone in other countries

The Bank of Russia on Thursday issued a report calling for a total ban on cryptocurrencies.

While Russia banned cryptocurrency payments in 2020 and the central bank last month floated a ban on cryptocurrency investments within the country, today’s proposal would go further.

Citing environmental concerns, it would immediately halt Bitcoin mining in the country, which provides over 10% of the computing power to the Bitcoin network. It would also prohibit financial institutions from handling any transfers of the digital assets. Not only would Russians not be able to buy goods and services in Bitcoin, they wouldn’t be able to buy Bitcoin.

Some countries have already banned cryptocurrency, either explicitly or implicitly.

According to a November 2021 Law Library of Congress report, nine countries have explicitly banned cryptocurrency: Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar, Tunisia and, of course, China.

With the exception of China and Nepal, all of these countries have large Muslim majorities. While a number of prominent clerics have declared Bitcoin to be “halal,” or acceptable, others — such as the Ulama Council in Indonesia — have ruled it “haram,” or forbidden, because the currency does not take physical form.

China, the world’s most populous country, has its own reasons for prohibiting cryptocurrencies. In critics’ eyes, the regime prioritizes financial surveillance as a means of maintaining control over its citizens, whereas decentralized technologies skew toward privacy and financial freedom.

Closer to Russia, a handful of former Soviet republics, namely, Georgia, Moldova, Tajikistan, and Turkmenistan have all implicitly banned crypto. Also on that list: Kazakhstan.

A June 2020 law said only cryptocurrencies backed by other assets (e.g., stablecoins) could operate in Kazakhstan, though it formally recognized Bitcoin as a commodity the following month and began leveraging its cheap energy prices to attract miners. But its electricity grid has struggled to accommodate an inflow of exiled Chinese Bitcoin miners.

Many crypto proponents see Bitcoin and decentralized networks as almost immune to bans; it’s difficult to police access and use of assets that are essentially open-source computer programs.


Several altcoins have suffered worse losses than the crypto market leaders

Less than 48 hours after Secret Network, a privacy-focused Layer 1 blockchain project built atop the Cosmos blockchain, celebrated its $400 million ecosystem funding, SCRT, the project’s native token, fell by a hefty 17.8% to become the crypto market’s biggest loser of the day.

As data from CoinGecko shows, in the early hours on Friday, SCRT fell to an intraday low of $6.81, returning to levels last seen a week ago.

There’s less to cheer about for LRC holders, the native token of the Layer 2-based crypto exchange Loopring, as it tanked 14.8% in the past 24 hours to the levels last seen at the beginning of November 2021.

LRC lost more than 58% of its value in the last month and is currently changing hands roughly $1 per CoinGecko.

The price of NEAR, the native token of Near Protocol, has also lost its recent momentum, plummeting by 12.7% over the day to the current value of $14.58.

Several other DeFi tokens are among the hardest hit too, with Aave and Chainlink down by 11.9% and 11.9%, respectively.

The latest price action saw Aave nosedive a monthly low of $185 before a rebound to $189.55, while LINK, the market’s 21st-largest asset, is trading at $19.63, the level last seen at the start of the year.


Open finance use case: Payments

No area in financial services has changed as dramatically in recent years as the payments space. This is just the beginning of what’s changing within the payments space with the rise of open finance.

Open finance enables financial services companies to connect to financial accounts via application programming interfaces (APIs) and quickly validate and authenticate data from a checking account. To get more specific, companies that implement open finance can use APIs to:

  1. Validate account numbers
  2. Validate account ownership
  3. Validate account balances

Once each item is validated, payments can safely and securely transfer within seconds, instead of the 1–3 days that are generally standard in the United States via ACH transactions.

Securely is a key word here, as 62% of consumers express some hesitancy about connecting their bank accounts — mostly because of issues related to security.

That said, once consumers understand how secure the process is, the uses for open finance are wide-ranging.

Take a landlord, for example, who wants to automate the payment process without pulling money from an account that doesn’t have sufficient funds. With open finance and direct APIs, landlords will be able to validate that an account has sufficient funds before the payment goes through — and the funds will be available within seconds instead of taking days. The same advantages are present for subscription-based products and even in-store payments.

What does all of this mean for banks? More than anything, it means that banks need to evolve.

Consider what happened when new entrants to the investing space offered a simpler app experience and no trading fees. Within just a few years, traditional players like TD Ameritrade and Charles Schwab cut their trading fees to compete. Why? Because they could see that keeping the relationship with their customers alive was worth more over the long term.

Banks should consider the same thing when it comes to open finance: Keep the relationship alive. If customers decide that they’re better off using open finance for payments — perhaps becave merchants start offering a discount for using such payments — these customers will go where they can use open finance. If this happens, these customers may leave banks, credit unions, and possibly even credit card companies for whoever offers the best real-time experience.

Payments backed by predictive analytics will truly be a game- changer that will benefit those companies that lead the way with open finance.


The blockchain trilemma

The blockchain trilemma refers to a widely held belief that decentralized networks can only provide two of three benefits at any given time with respect to decentralization, security, and scalability.

Let’s dive deeper into each component of the blockchain trilemma.


Decentralization is the central ethos of blockchain technology and drives projects across the ecosystem. Applying decentralized processes and tech eliminates the role of intermediaries across industries and manifests in many different ways.

However, achieving optimal decentralization tends to decrease network throughput. As more miners secure the network through consensus, transaction speeds drop — which is considered a hurdle to widespread adoption.


To increase network throughput on a blockchain network, there’s an incentive to reduce the distribution of blockchain nodes either geographically, in number, or both. However, this pivot towards greater centralization reduces security on Proof-of-Work (PoW) networks.

When consensus is achieved on an open network with limited nodal distribution, a 51% attack is more likely to occur as hackers can amass hashing power with greater ease. By overwhelming a network, hackers can hijack the network and manipulate transactions for financial gain.


Scalability in regards to a blockchain protocol refers to its ability to support high transactional throughput and future growth. This means that as use cases expand and adoption of blockchain tech accelerates, the performance of a scalable blockchain won’t suffer.

Blockchains that perform poorly as adoption increases are said to lack scalability. The blockchain trilemma tells us that greater scalability is possible, but security, decentralization, or both will suffer as a consequence.

However, ongoing innovation across the decentralized ecosystem has led to a diverse range of Layer-1 and Layer-2 solutions that are overcoming these obstacles to solve the trilemma once and for all.


Payment facilitators show signs of slowing down

Incorporating payment facilitation into their business has given startups increased control processes, fee structures and funding schedules, while simultaneously allowing them to tailor their products to uniquely fit their customers’ needs.

With an expanding customer base accelerated by the forced digitization brought on by the pandemic and more companies integrating a payment facilitation model, the opportunity for payment facilitator solutions is growing exponentially.

A good example of the latter point is Mindbody, which has seen payment make up 40% of its revenue, up from 30% just five years prior, benefitting from the launch of its dynamic pricing functionality that helps its customers’ price classes based desired goals while providing rich customer data to the merchant.

The first wave of payment facilitators (Paypal, Stripe, etc.) pioneered a system that contains fewer hurdles for merchants looking to process digital payments, setting the stage for software companies across all verticals to follow the suit. Outside of Mindbody within the wellness space vertically-focused software such as Toast, in the restaurant industry, Instamed and Phreesia in the healthcare space, or RunSignup in the event management vertical — have been some of the most successful startups at integrating payment facilitation.

This excitement around payment facilitators can also be seen in the valuation step-ups for recent raises for notable payment facilitators. Analyzing SVB proprietary data revenue trends or a representational cohort of payment facilitators shows revenue has accelerated since the start of the pandemic with no signs of slowing down.


Crypto, DeFi and Disruption

Even if you’ve been living under a rock, you’re probably familiar with Bitcoin. Now, just as crypto disrupted the concept of value, decentralized finance is poised to disrupt finance itself.

The populist movement promises huge returns for daring investors. But with DeFi’s promise of inclusion comes risk and uncertainty.



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