Facebook’s digital currency wallet Novi is now live. But it’s not what you expected 👀; Tesla takes on InsurTechs 🥊; PayPal has a pin on Pinterest 😮
You're missing out... Weekly Recap 🔁
Good morning Everyone,
And happy Saturday! Hope your week was great & productive (it sure was if you’re subscribed to this newsletter 😎). Before you go Netflix & Chill, I invite you to take a look at the three stories that were moving the headlines this week in the financial technology world. You can uncover other stories, keep the FinTech pulse daily and get at least X5 more by becoming a subscriber. Join the community here:
And here’s a mix of 3 wonderful stories from this week:
Facebook’s digital currency wallet Novi is now live. But it’s not what you expected 👀
The launch 🚀 Social media giant Facebook has finally launched a long-awaited pilot of its digital currency wallet Novi in the US and Guatemala. It has chosen to use the Paxos Dollar stablecoin after its own cryptocurrency Diem failed to get backing from regulators.
Users can hence start trading the Paxos Dollar (USDP). Crypto exchange Coinbase will provide custody services for the program.
The process 👉 Users can ow download the app on iPhones or Android and register with a government-issued ID.
Once you download the Novi app, you create an account and add money using a payment method, such as a debit card. Whenever you add USD, your money is converted to USDP without any fees. USDP is a stablecoin tied to USD created by Paxos.
Behind the scenes, USDP is backed by cash and cash equivalents to ensure its value. User funds are managed by Coinbase Custody, meaning that Coinbase stores USDP funds for Novi users.
Novi users can then send USDP to other Novi users. Once again, there are no fees involved with money transfers
✈️ THE TAKEAWAY
Long way to go & many battles to win. Facebook originally announced Novi alongside Diem in June 2019. At the time, the wallet, then known as Calibra, was intended to support the then-Libra stablecoin before regulatory backlash changed the scope of the project. Although FB had to make compromises, it’s clear that their support for Diem hasn’t changed and they still intend to launch Novi with Diem once it receives regulatory approval and goes live. And that’s actually one of the biggest battles they need to win. Not only do they have to convince regulators that they can manage a payments system (they failed multiple times to do that with their social network) with all the risk and compliance issues. More importantly, they have to convince users that they need that wallet in the first place. Funny thing is that the former might actually be easier than the latter…
Tesla takes on InsurTechs 🥊
The news 🗞 Tesla is going further into the insurance business marking the electric carmaker’s first usage-based insurance (UBI) product after launching a traditional insurance program in California 2 years ago.
The USP 🥊 In Texas, Tesla’s premiums will be based on its proprietary safety score.
The scoring system was first used to determine whether a driver could access their car’s “Full Self-Driving” option, and it will now be used to underwrite Tesla drivers who buy its insurance in the state.
The score is calculated by analyzing the customers’ real-time driving behavior based on five criteria: instances of forward-collision warnings, hard braking, turning corners aggressively, unsafe following, and forced Autopilot disengagement.
The price will be revised every month, with those deemed “average” drivers said to save 20% to 40% on their premiums compared with other providers.
✈️ THE TAKEAWAY
Tesla is a FinTech. With this new product, Tesla could potentially offer cheaper and more flexible coverage than InsurTechs. One straightforward example is UBI InsurTech Metromile, which charges not only a rate based on driving distance and behavior but also a base rate that takes into account traditional factors like claim history, age, and gender. By contrast, Tesla says it will solely focus on driving behavior and will only charge one rate (and this is a huge advantage). Furthermore, monthly renewals make it more flexible than Root, which only uses driver data to change its prices every six months. Finally, Tesla’s offering is also seamlessly embedded in its cars, whereas competing UBI offerings tend to require either installing a physical device or downloading an app. When you add it all together, Tesla is uniquely positioned to seamlessly tap into the Insurance market. And it’s an exciting opportunity as there’s a growing demand for such solutions: various forecasts estimate 52.5M US drivers to buy UBI coverage by 2023, up from 37M this year.
PayPal has a pin on Pinterest 😮
The rumors 👀 Payments giant PayPal is reportedly exploring the purchase of social media company Pinterest, according to Bloomberg.
According to the publication, San Jose, California-based PayPal has “recently approached” Pinterest about a potential buyout. Citing an anonymous source, Bloomberg said PayPal could pay around $70/share, which would value Pinterest at about $39 billion. Not too shabby! 😎
The market supports that 👉 Pinterest’s stock jumped by about 12% on the news, trading at just above $62 during the day. That’s still down from a 52-week high of $89.90. The rumored purchase price would be in line with Pinterest’s current market cap of $40B. For its part, PayPal is currently worth $308B in the public markets.
✈️ THE TAKEAWAY
It’s all about the Super App📲. PayPal is super serious about its Super App ambitions and it’s trying to become what AliPay is in China. At the core, it’s all about having more services within its ecosystem, and Pinterest could be a perfect fit. Especially given that over the past 18 months+, social media platform has made a concerted effort to expand into an e-commerce platform, launching a new way to shop on its platform, (giving Pinterest users the ability to browse in-stock inventory from newly added “Shop” tabs on Search and on Pinterest boards) as well as improved visual search to make more products shoppable from Pins. If the deal goes through, it will be one of the biggest consumer internet takeovers in years, topping Salesforce’s $27.7B purchase of Slack last winter.
🔎 What else I’m watching
Proactive 😌 Buy now pay later (BNPL) giant Klarna is modifying its services in the U.K. ahead of new regulations expected to be handed down by financial watchdogs in the country, according to a press release. Some of the changes have to do with how certain aspects of the service are worded. Klarna will now clearly spell out that BNPL is a credit offering that has penalties for missed payments. At checkout, aside from being offered payments spread over weeks or months, customers can choose a new Pay Now feature. Klarna also indicated that it would take a stricter stand with credit checks and enable people to share wage and income data from their bank accounts to prove they can make the repayments.
Playing with CBDC🇫🇷 France’s central bank has executed a series of bond transactions leveraging blockchain using its own digital currency as part of a 10-month pilot. The Banque de France, along with a group of France’s largest financial market participants, executed the transactions using a system developed by U.S.-based IBM, according to a statement from securities depository Euroclear.
It’s all about that BaaS 🎶 Banking giant HSBC has announced the launch of a Banking as a Service (BaaS) offering that will help customers to create and provide business banking services through their own platforms. HSBC and Oracle NetSuite, one of the cloud Enterprise Resource Planning (ERP) systems available, are working together to provide international payments and expense management services embedded into NetSuite’s new SuiteBanking solution.
Wise revenues 📊 Solid second-quarter trading helped lift Wise’s, one of the leading international payments players, revenues to £132.8M during the last 3 months, up 25% year on year. The sharp increase was driven by international transfer volume growing a massive 36% to a whopping £18B, boosted in part by Wise’s recent cuts to the fees it charges on transfers.
💸 Following the Money
Microlender to the underbanked Tala has raised $145M in Series E financing to fund a host of new services, including crypto.
Intercontinental Exchange (ICE) has sold its 9.85% stake in clearing and settlement platform Euroclear to Silver Lake for €709M. The deal, subject to customary closing conditions and regulatory approval, is set to close in the first half of next year, with private equity giant Silver Lake gaining a seat on the Euroclear board.
India-based FinTech CRED has raised $251M in a new financing round, its third funding in 2021, at a valuation of $4B.
Brazil-based cloud-native core banking platform Pismo has announced a $108M Series B fundraising round, led by SoftBank, Amazon, and Accel.
👋 That’s it for today! Thank you for reading and have a productive weekend! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:
P.S. This is a free and short issue that might not be published every week. Subscribe now and keep the FinTech pulse daily, make sense of what’s happening in the financial technology space every day and stay ahead. You will save at least 180 minutes. Every week.