Brilliant timing: Stripe dives deeper into digital currencies as it launches crypto payouts 💸; Open Banking is much greener than card payments?🍃; Meta’s latest results show why it needs Metaverse 🕶
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👋 Hey, Linas here! Welcome to a 🔓 weekly free edition 🔓 of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.
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2 Bitcoin graphs you need to know today (and what they mean) 📈
Why does everyone want to work in crypto? 🤔
and more!
As for today, here are the 3 FinTech stories that were moving headlines this week. It was a hot one!
Brilliant timing: Stripe dives deeper into digital currencies as it launches crypto payouts 💸
The news & partnership 🗞🤝 $95 billion FinTech giant Stripe is piloting a new crypto payouts feature with Twitter as their first customer, letting creators on the social media app collect their earnings in the USDC stablecoin.
More on this 👉 The payments giant has added crypto payouts to Connect, its programmatic (API-based) payouts platform. Companies like Twitter already use Connect to power various monetization services aimed at creators which include things like Tips, Super Follows, and ticketed Spaces events. Connect is available in local currencies already in 70 countries.
Here’s what crypto twist will add to Stripe’s Connect suite:
Eligible users of Twitter's Ticketed Spaces and Super Follows monetization products will be able to receive their earnings in USDC, the stablecoin issued by Circle.
Payouts will take place over the Polygon network, which Stripe reportedly chose for its low fees, speed, integration with Ethereum, and wallet compatibility with the likes of MetaMask, Coinbase Wallet, and Rainbow.
Once creators receive their earnings, they can hold their balance on Polygon, or choose to bridge to Ethereum and exchange it into another currency.
Stripe says it plans to add support for additional rails and payout currencies over time and to bring the service to other businesses.
The crypto pivot 👀 We can remember that just last month Stripe released a series of APIs and other tools for developers to start integrating Stripe’s crypto features. It includes support to use fiat to buy more than 135 crypto tokens, cash-out facilities (=payouts), NFT trading, and compliance features like Know Your Customer (KYC) (crypto exchange FTX was onboarded as the first customer), among other things.
What does it mean? 🤔 Stripe was one of the first payments companies to support cryptos back in 2014, but the firm stopped 4 years later due to limited merchant and user adoption. Now it’s reentering the space big time, and both the timing & Stripe’s position are brilliant. Here’s the takeaway:
✈️ THE TAKEAWAY
Staying in the game. First and foremost, we must stress that the timing of Stripe’s re-entry into the digital assets space is brilliant as it is uniquely positioned to leverage its brand and market dominance. Global ownership of crypto rocketed 881% in 2021, according to Chainalysis data while the Biden administration signed an executive order on cryptocurrencies back in March that signaled broader future oversight of the industry. Hence, Stripe's crypto service launch will not only help it keep pace with the competition (payments giants like PayPal, Visa, MasterCard, and Block have all dipped their toes in the crypto space in 2021), but also will boost the payment giant’s revenues. Furthermore, Stripe’s solid API tool kit and developer-first approach will open the door for other companies looking to build or improve their digital asset-related products further boosting Stripe’s bottom line. Zooming out, the Web3 focus might be one of the catalysts that should help Stripe’s growth and boost the $95B price tag even further.
Open Banking is much greener than card payments? 🍃
New data 📊 Open banking payments seem to generate 4X fewer carbon emissions than cards, according to GoCardless study.
More on this 👉 According to new research from payments company GoCardless, a typical card transaction generates around 0.53 grams of CO2 emissions versus 0.13 grams for account-to-account payments, AltFi reported.
The reason is the convoluted eight stages involved in a typical card transaction, as data bounces between the merchant, payment processor, card provider, and bank.
This effectively means that card transactions are responsible for over 400,000 tonnes of carbon emissions each year, and hence switching to account-to-account payments could reduce that to just 100,000 tonnes.
✈️ THE TAKEAWAY
OB could be the future. While you always have to take such research with a grain of salt (because companies like GoCardless are very eager to move you to account-to-account payments), this study, if representative, is yet another proof of where the future of payments (and finance) might be heading. Not only does it mean that there’s a lot of innovation to be unlocked with the help of OB, but it’s clear that how we pay for things can play a part in making our future more green, irrespective of whether it’s A2A payments or not. And we will make it! 🍃
Meta’s latest results show why it needs Metaverse 🕶
The news 🗞 Meta posted its slowest quarterly revenue growth since going public as Facebook in 2012. In the previous quarter, Meta reported a $1B profit hit and its first-ever dip in daily users. Although in the latest financials, users actually ticked up, financials weren’t great.
More on this 👉 The latest results show that sales growth majorly slowed to 7%, from 20% in the previous quarter. Profit fell for the second quarter in a row, down to $7.5B, from $9.5B a year earlier. One can add that Meta has spent as much as $10B on its meta-ambitions. Despite all of this, Meta stock popped 16% after it reported the results, as investors were surprised by better-than-expected profit.
What’s next? 🤔 You want to hear a crazy story? It’s this - Meta stock had lost nearly half its value this year alone. And this is exactly why it really needs the Metaverse. Here’s the takeaway:
✈️ THE TAKEAWAY
Diversification matters. Again. Let’s zoom out a bit and stress that Meta isn't the only Big Tech firm that has been struggling with its growth as of late. Netflix tanked recently on the news that it lost 200K subscribers, Google reported slowing sales growth and profits while Snap posted disappointing earnings too. This brings us to the key point here, which is this - revenue diversification matters and often is crucial. The economic situation is too fragile right now to rely on a single revenue stream. A brilliant example here could be Microsoft which crushed earnings thanks to strong demand not only for its software but also for its cloud and cybersecurity services. How is Metaverse related here? Well, it could come to the rescue… 🤷♂️ Meta just announced it is testing means for creators to sell virtual goods and experiences within its Horizon Worlds metaverse platform, as well as a creator bonus program. The moves are a notable step toward forming the building blocks for Meta’s metaverse concept, where creators can get paid for their assets, and Meta takes a (meaningful) cut in the process. Meta sees its nascent metaverse delivering greater revenues as time passes, and given all the hype and growth of the space, this could be a winning key 🔑 for a more diversified future. The open question here is how many metaverses there will be and whether Meta will be big enough to matter.
🔎 What else I’m watching
RegTech on the rise 🚀 A new study from Juniper Research has found that global RegTech spending will exceed $204B by 2026, accounting for over 50% of all regulatory compliance spending for the first time. This spend will grow from USD 68 billion in 2022, representing a growth of over 200% over the next four years. The report identified the integration of RegTech services with Banking-as-a-Service (BaaS) models as key to realizing this future market growth. The new research, Regtech: Emerging Trends, Regulatory Impact & Market Forecasts 2022-2026, predicts that BaaS models, which include outsourcing RegTech services such as digital onboarding, will be key in accelerating AI-based automation for online document verification and Know Your Customer (KYC) processes.
Strengthening positions in the NFT sea 🌊 OpenSea has acquired NFT aggregator service Gem. News of the deal was revealed in an email sent to Gem investors and seen by The Block. Gem lets you buy and sell NFTs across multiple marketplaces and makes it easier to sweep the floor of an NFT collection (that is buy a range of the lower end of the collection). Following the acquisition, Gem will continue to operate as a standalone brand. The NFT marketplace biz is going to get a lot more interesting!
Cross-Border Real-Time Payments?! 👀 Yup, that might be possible very soon. A pilot program for immediate cross-border (IXB) payments is being launched by EBA CLEARING, SWIFT, and The Clearing House (TCH), garnering banking support from the U.S., the U.K., and western Europe, according to a press release. Anticipated to launch before the end of 2022, the pilot will be introduced in phases to accommodate 24 financial institutions, some of which are joining the pilot. The three private sector firms owned by member banks are developing the pilot as part of their IXB initiative to enable faster, smoother global money transfers by tapping options available in domestic payments. The initial proof of concept was finished last October with input from seven banks. Eleven financial institutions participated in the design of the system. With proper execution, it could potentially challenge Wise, Remitly, and other players in the IMTO space. Read more here.
💸 Following the Money
Germany-based FinTech Moojo has announced successfully closing its pre-seed financing round of $2M and entering the market with an instant payment solution connected with a free invoicing tool.
Nigerian FinTech startup Afriex raised $10M for its blockchain-based money transfer platform.
0x Labs, which provides a decentralized exchange (DEX) protocol and non-fungible token (NFT) standards and infrastructure, raised $70M at an undisclosed valuation in a Series B round led by Greylock Partners.
👋 That’s it for today! Thank you for reading and have a productive & restful weekend! And if you enjoyed this newsletter, invite your friends and colleagues to sign up: