Fintech Newsletter for 4/24/21

Below are news related to fintech industry this week.

General News

PayPal(PYPL) introduces a couple of new offerings.

Venmo support for cryptocurrency

Let’s compare and contrast the offerings. Beginning with similarities,

  • Both offerings let its users use one of the following four cryptocurrencies -Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
  • Both offerings leverage PayPal partnership with “Paxos” -A trust company — and use the “crypto brokerage” service from Paxos.
  • Both offerings let consumers buy, sell, and hold cryptocurrencies. Consumers can buy cryptocurrencies as low as $1.

What is a trust company?

“Trust company is a third party company that can act as trustee or in other fiduciary capacities.”In the context of PayPal and Paxos, Paxos is currently a certified trust company regulated by the New York State Department of Financial Services. Trust company will act as a “custodian” for crypto assets that Paypal uses. Paypal will benefit by not having to worry about regulation by leveraging Trust Company such as Paxos.

Paxos, in turn, will benefit by profiting from “economies of scale” — i.e., selling the same infrastructure to multiple clients.

Let us see the differences,

  • Venmo app targets younger audiences as compared to PayPal’s traditional offering.
  • Venmo lets its user base share their bitcoin journey on the “Venmo news feed,” which will help increase awareness of cryptocurrency in the mainstream — with 70 million users in Venmo, the network effects can kick in to make this service popular.
  • PayPal offering targets the checkout process at merchants. However, the Venmo offering, to begin with, appears to be more targeted to buy, hold and sell crypto investment enthusiast.

PayPal plans to build a local wallet for China.

PayPal has entered uncharted territory by entering into china’s payment ecosystem — it will be interesting to see if PayPal can emerge successfully withstanding local regulatory environments and competition from traditional Chinese payment players.

Facebook(FB) backed digital currency “Diem” plans to launch this year.

So what is “Diem” Announcing?

Our earlier newsletter mentioned a “central bank digital currency” (CBDC) project in Sweden called “e-korna.” it will be interesting to see how the “stablecoin” issued by Diem plays with the local country’s digital currency. Also will be worth watching if some underdeveloped countries rely entirely on “Diem.”

What is “Stablecoin”?

A stablecoin is a digital currency pegged against a stable external asset to mitigate volatility associated with native digital currency.

For example, Diem’s first stablecoin uses the U.S dollar as its peg.

MasterCard (MA) acquires digital identity verification company Ekata.

Affirm(AFRM) to buy Returnly

Affirm also quoted in the press release that U.S consumers returned $ 428 billion worth of merchandise in 2020, and online purchase returns are thrice as much as traditional brick and mortar stores. This data shows the value of Returnly to Affirm.

Dogecoin, a cryptocurrency created as a fun project, has become an investment sensation. Celebrity endorsements such as Elon Musk, Snoop Dog, among others, have helped Dogecoin to skyrocket. The cryptocurrency has had a 5,000% increase in its value just this year, yes, 5,000% — speculation at its best. Unlike Bitcoin, which capped at 21 million tokens, Dogecoin doesn’t have any limits, so a sudden surge in supply could send the coin crashing. It will be worth watching to see where DogeCoin ends up by the end of the year-there is widespread speculation that DogeCoin can hit the $1 mark. Will it? Let’s see

Fintech New Venture and IPO

  • CoinSwitch, India based cryptocurrency investment platform, raises $25M in Series B funding.
  • Percent, New York-based securitization platform, raised $12.5M in Series A funding.
  • Alto, Nashville based IRA platform, raised $17M in Series A funding.
  • Tribal Credit, San Francisco-based financial services company, raised $34.3m in a new round of funding.
  • Deel, the San Francisco-based international payroll company, raised $156m in Series C funding.
  • Bespoke Financial, Los Angeles-based lending service to the cannabis industry, raised $8M in Series A funding.
  • Candex, Miami based payment processing platform, raised $20m in Series A funding.
  • Chargebee, San Francisco-based subscription billing and revenue management platform, raised $125M in Series G funding.
  • MANTL, a New York-based banking technology company, raised $40M in Series B funding.
  • Razorpay, India based digital payments company, raised $160m in Series E funding.

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