Use case of NFTs in commercial real estate; UK court gives OK to sue on Blockchain; Growth drivers of embedded finance;
In this edition:
1️⃣ In Defense of Pay-as-You-Go
2️⃣ Use case of NFTs in commercial real estate
3️⃣ Disruptive value propositions for the SMBs
4️⃣ UK court gives OK to sue on Blockchain
5️⃣ Growth drivers of embedded finance
6️⃣ Goldman Sachs plans to slow hiring and reinstate annual performance reviews
7️⃣ Another fintech move by Meta
8️⃣ Crypto exchange Gemini executes second round of layoffs in less than two months
In Defense of Pay-as-You-Go
Faster adoption, faster expansion
PAYG companies match the timing of spend and value by only charging customers for what they use. By comparison, subscription contracts are typically written to have fixed payment terms over the life of the contract. Cost is agreed upon, and often paid upfront, well before customers have realized any value. Breaking down barriers to adoption allows PAYG businesses to more easily find a foothold in the market.
We have even seen PAYG fintech companies accelerate new user growth by removing their subscription tiers for premium features to tap into latent demand that was less willing to pay for subscription. A subset of PAYG companies further lower the barrier to adoption with “invisible” pricing, in which the cost of their service is passed onto a third party, rather than to the customer. For example, AtoB, Jeeves, and Mercury offer their software platforms and corporate cards for free to customers and earn revenue on interchange fees paid by merchants.
Similarly, in PAYG fintech, expansion tangibly means that a customer uses more of the same product. This expansion can happen without any sales interaction, a common point of friction for subscription companies. For example, “net expansion” for Plaid means their customers are connecting more accounts, and for a consumer debit card, net expansion means customers choosing to swipe more often — both entirely frictionless, no-touch processes. PAYG fintech companies can expand at staggering rates within customers. In an analysis of 45+ SMB-focused public- and growth-stage private companies, we found PAYG fintech companies sometimes exceeding 250% net dollar expansion at scale.
When a PAYG fintech company hits product-market fit, faster net expansion can build on top of lower barriers to adoption to create an incredible growth machine. What’s more, PAYG fintech companies can often charge a higher per-unit price than subscription companies can, similar to how buying a single candy bar is more expensive than buying in bulk. In recent years, many of the fastest growing companies passing $25M and $100M revenue scale were PAYG fintech companies (e.g., FTX, Deel). We think at its best PAYG becomes a one-two punch (faster land, faster expand!) that’s able to “kink” the revenue growth curve over time, relative to subscription.
Source Andreessen Horowitz
Use case of NFTs in commercial real estate
Even though I am not against the use of NFTs in their current form mainly in arts, music and etc in the digital world the real benefit of NFTs actually is to be harnessed in real-world use cases.
Why Use NFTs For Real Estate?
One of the downsides of investing in real estate is the hassle of transferring property ownership. It currently takes a tremendous amount of paperwork to buy a property or open an equity line. With an NFT, the transaction process is streamlined, allowing a buyer to assume ownership of a piece of real estate within minutes.
Digital transactions are often susceptible to cyber fraud. However, by using blockchain and NFT technology, you can achieve higher levels of security and data integrity. This protects both buyers and sellers and makes it much easier to transfer assets without any problems. Buyers can then borrow against the NFT using decentralized finance (DeFi) or traditional finance (TradFi) products on the blockchain, skipping the arduous due diligence required by most big banks when taking out a mortgage.
How Does It Work?
In order to sell real estate as an NFT, the first step is to undergo the necessary legal preparations to ensure it meets regulations. This requires involving legal counsel with experience in blockchain technology. Staying within the confines of the law is always a priority, but it poses challenges with the introduction of new technology. Think about online banking and how far it has come since the advent of the internet.
Once you’re prepared to move forward, you can mint an NFT with descriptive and legal data about the property. Minting is a process that can be done by anyone by uploading a JPEG and smart contract to an NFT marketplace — a website that provides NFT creators and buyers with a safe environment to buy and sell NFTs. This imbues the NFT with all the necessary paperwork, disclosures and reports to give it the legal authority to represent proof of ownership.
Once you’ve created the NFT, you can enter it into an NFT marketplace to be sold to potential buyers. Buyers will bid for the property, and the winner of the auction will pay for the property in fiat money or cryptocurrency. Once the funds have been released to you and the NFT has been transferred to the buyer’s wallet, the buyer will complete paperwork to finalize the transfer. Once the buyer owns the NFT, they own the property.
Many more use cases of NFTs in real estate are sure to change the industry as a whole. All in all, the process of transferring ownership should take only minutes, which is revolutionary compared to the length of time it currently takes to buy property. With our tendency to desire a “one-click” option for buying and selling, it’s only a matter of time before NFTs and real estate go hand in hand.
Disruptive value propositions for the SMBs
Open Data for SMBs
Regulatory and market initiatives around Open Finance have unlocked new opportunities for consent-based data sharing among financial institutions and third-party providers (TPPs). In the realm of Open Finance, the TPPs can access granular and high-provenance data from several applications used by SMBs such as banking, accounting, ERP, invoicing, payroll, etc. This data sharing enables SMBs to primarily benefit from two categories of use-cases:
Gain access to personalised financial services: Consent-based data sharing with TPPs such as fintechs, neobanks, expense management platforms, insurance providers, etc., allow SMBs to access better financial products and services, improve approval rates, and reduce approval, onboarding, and disbursement times.
Embedded finance for SMBs
In the last few years, more and more non-financial players have started to offer integrated financial services such as bank accounts, digital wallets, corporate cards, payments, lending, transaction banking, and investment products alongside their core offerings to SMBs. Some of these non-financial digital platforms, such as Deliveroo, DoorDash, UberEats, and Shopify, use embedded finance as a strategic lever to foster a unique relationship with customers and increase their lifetime value by reducing their run-the-business overheads.
An Accenture analysis forecasts that embedded banking for SMBs could capture up to 26% of global SMB banking revenue by 202510. The survey also predicts that 41% of SMBs would be interested in using banking services from a digital service provider, and 47% of them would be willing to pay the same or more for embedded finance compared to traditional banks.
Digital finance for SMBs
As per a recent Oliver Wyman survey, 75% of SMBs have little to no loyalty to existing banking relationships11. They are quite price-sensitive and will switch if lower-cost options provide a similar level of service. SMBs also welcome self-service digital channels, with more than 90% indicating they are comfortable with them. Another McKinsey analysis found that digital SMB banks enjoy up to 70% lower cost-to-serve SMBs than their traditional peers.
Financial automation for SMBs
As per a Deloitte survey, 85% of SMBs who use financial automation tools in their day-to-day operations confirmed that they had helped their business in some way. The widespread adoption of financial automation tools by SMBs has unlocked new value-generating opportunities, such as:
Development of fintech solutions/marketplaces integrating and automating workflows across banking, finance, and operations
Bundling of these solutions with digital banking offerings as value-added services for SMBs
Development of new risk assessment models based on access to alternate data points
UK court gives OK to sue on Blockchain
In Britain, you can now use the blockchain to sue someone.
A UK judge gave the go-ahead to serve legal documents — the process of bringing a lawsuit to a person’s attention — over the blockchain ledger by a nonfungible token for the first time, according to court documents made public this week.
An NFT is a line of code on the blockchain that confirms unique certificates of authenticity. They’re typically used to prove ownership of a piece of digital art.
The ruling comes from a case brought by Fabrizio D’Aloia, founder of an online gambling company, who’s suing cryptocurrency exchange Binance Holdings and other platforms. D’Aloia filed the claim after his crypto assets were fraudulently cloned on the brokerages.
The court also ruled that the exchanges were responsible for ensuring stolen crypto is not moved or taken out of their systems.
The service will now take place by airdropping the lawsuit documents via NFT into two wallets that were originally used by D’Aloia and stolen by the fraudsters. This paves the way for victims of crypto fraud to sue unknown crooks in the UK, law firm Giambrone & Partners LLP said.
A US court made a similar move to authorize service via an NFT in June.
Growth drivers of embedded finance
Across a range of industries, Lightyear Capital estimated that embedded finance will produce nearly $230 billion in revenue by 2025, up from $22.5 billion in 2020. At a five times revenue multiple, embedded finance will create more than $1 trillion of value by 2025.
This growth will be driven by a rapidly maturing embedded finance ecosystem, which is made up of three categories of participants:
• Banks. Today, only a small number of U.S. banks participate in the embedded finance economy. By 2026, however, roughly 300 banks will share in the roughly $25 billion in annual revenue generated by embedded finance, according to Cornerstone Advisors.
• Brands. The value of embedding financial services in a non-financial company’s offerings spans a number of different areas, as Matt Harris, partner at Bain Capital Ventures, outlined in a seminal article on embedded finance:
“Having financial functions integrated with software enables new functionality, leveraging the persistent connection to move beyond transactions to relationships. If you’re utilizing software to run your business, using that same software to get paid and make payments is logical and more natural than going to your financial institution to do so. These relationships are data-rich, which leads to smarter cross-sell, pre-qualification, and risk reduction. The monetization opportunities are not only large, but actually meaningfully larger than the original software opportunity”.
• Banking as a service (BaaS) platforms. A major accelerant of embedded finance is the emergence of BaaS platforms, which provide the technical, operational, and legal middleware between banks wanting to offer BaaS and non-financial companies that need to find and integrate a bank partner (or partners). These platforms dramatically lower the upfront costs and accelerate the time to market for non-financial brands launching embedded financial products.
The infrastructure now exists to enable non-financial brands — across many industries and use cases — to offer their customers access to seamlessly embedded financial products that strengthen the brands’ relationships with customers.
The potential value of embedded finance rests on a very important assumption — that consumers will obtain financial products from their favorite brands if the brands offer them.
Curiously, despite all the hype around embedded finance, this assumption has gone largely unexamined.
To address this oversight, Cornerstone Advisors surveyed 2,555 American adults about their use of and interest in embedded financial products and services from their favorite non-finance brands, and the impact that financial products have had, and could have, on their relationships with those brands.
Source Cornerstone Advisors
Goldman Sachs plans to slow hiring and reinstate annual performance reviews
Goldman Sachs plans to slow hiring and reinstate annual performance reviews as the Wall Street bank looks to rein in expenses.
“Given the challenging operating environment, we are closely re-examining all of our forward spending and investment plans to ensure the best use of our resources,” Chief Financial Officer Denis Coleman said Monday on a conference call with analysts. “We’re taking a number of actions to improve our operating efficiency. Specifically, we have made the decision to slow hiring velocity and reduce certain professional fees going forward.”
In addition, the New York-based firm could reduce the pace of replacing staff it loses because of attrition, Coleman said, adding that it plans to reinstate annual performance reviews at the end of the year, a practice it had suspended during the pandemic.
The reviews were typically used to weed out the worst-performing staff.
Total operating expenses declined in the second quarter from a year earlier as the firm cut compensation and benefits, but the company also reported increases in costs from growth initiatives.
Source Bloomberg LP
Another fintech move by Meta
Instagram is launching a new “payments in chat” feature. With this new feature, users can purchase products from small businesses and track orders via direct messages on Instagram in the United States.
To use the new feature, users can start by sending a direct message to a qualified small business they’re interested in buying from. In that same chat thread, they’ll then be able to pay, track their order and ask the business any follow-up questions. The company says users often chat about their orders with businesses via DMs on Instagram before purchasing but will now be able to pay sellers directly within their Instagram chat thread. Purchasing via DMs also gives users access to in-app chat support, Meta says.
“You can now buy products from small businesses and track your order in chat on Instagram in the U.S.,” Zuckerberg said in the announcement post. “Pay with Meta Pay and checkout in a few taps.”
A screenshot shared by Meta shows that once a buyer has decided to make a purchase, the seller can create a request for payment. Once a user selects the “Pay” button, they will be asked to add and review their payment information and shipping address. The screenshot notes that “your payment will be processed by PayPal.”
Meta notes that small businesses in the United States who currently don’t use Shops will now be able to discuss products, create orders with customer details and accept payments — without having to switch to another app. When a business is ready to set up a digital storefront, they can use Shops on Instagram and Facebook.
The company says one billion people message a business across its family of apps each week, whether it’s chatting with brands, browsing products or asking for support.
The launch of the new feature comes as Meta officially renamed Facebook Pay to Meta Pay last month. The current product features and overall user experience that people are used to with Facebook Pay remain the same across Facebook, Instagram, WhatsApp and Messenger. At the time of the rebrand, Zuckerberg said although the service will remain the same, the rename represents Meta’s first step toward creating a digital wallet for the metaverse. He says his vision for a digital wallet in the metaverse will let users securely manage their identities, what they own and how they pay.
Crypto exchange Gemini executes second round of layoffs in less than two months
Just seven weeks after crypto exchange Gemini cut approximately 10% of its workforce due to “turbulent market conditions,” the startup has made a second round of layoffs, TechCrunch has learned, and there may be more on the way.
The company had not widely communicated the extent of Monday’s layoffs internally, leaving employees to speculate on the exact number of co-workers laid off in this most recent downsizing. A source close to the company noted that there was a reduction of 7%, or 68 members, in Gemini’s companywide Slack channel Monday morning.
Gemini has not yet responded to a request for comment.
The same source, who spoke with TechCrunch under the condition of public anonymity, said that the company was laying off staff due to what it described as “extreme cost cutting.”
Last week, an internal operating plan document was shared around the office and on an anonymous professional network Blind on July 14, but taken down shortly after, the source shared. The document highlighted a plan that would take the company to about 800 employees, which was around 15% fewer than the 950 employees at the time.
“It’s come to my attention that at least one team member thinks it’s a good idea to post a snippet of our technology operating plan on a third party website (Blind),” Cameron Winklevoss, co-founder of Gemini, wrote in a Slack message at the time. “Wow, super lame … if you are leaking company information, you are exhibiting a low level of consciousness and respect for your fellow team members who greatly benefit from the openness we are trying to create and foster here.”
TechCrunch viewed an image of the Slack message in question. Winklevoss also said that the message was a “friendly reminder that Karma is the blockchain of the universe — an immutable ledger that keeps track of positive and negative behavior.”
“We are going to the moon. We are going to need cosmic consciousness to get there. Earthly consciousness will not be enough,” Winklevoss added. “If you are exhibiting the behavior of a first-time human, time to level-up or respectively bow out, if for no other reason but to avoid an expensive bill in the future.”