Blueprint: A personal note on persevering + Tellus real estate savings; Santander crypto pmts ban; Klarna's shopping engine
Look, we don’t like this any more than you do. Is this worth it? And if yes, what is it for?
Hi Fintech Futurists —
Look, we don’t like this any more than you do. Markets in total disarray. Equity values in tech and growth annhilated. Good actors in our industry, like Cathie Wood, seen as getting things completely wrong. People like SBF of FTX, Do Kown of Terra, and Su Zhu of Three Arrows Capital disgraced and exposed. Crime, fraud, theft. At some point, you have to look around at the grift all around, and start asking some profound questions. Is this worth it? And if yes, what is it for?
When Lehman collapsed after the housing crisis, people still needed houses. When the Internet bubble burst, we still needed the Internet. That’s our view on crypto. The financial grift that has grown out of crypto is not its core substance, nor its core motivation. The blitzscaling venture capital SPAC playbook is not the same things as the need for digital fintech. Don’t let the skeptics and opportunists blur it all together. Sometimes it feels like you are the last one dancing in a game of musical chairs. And that there will be no chair for you to sit on as the music stops.
But look, maybe we just like the dancing for its own sake. The chairs are just a distraction. And that’s as good a reason as any to keep doing it.
And with that, today’s agenda is below.
INVESTING: a16z-backed Tellus wants to offer consumers a much better savings rate. Here’s how. (link here)
CRYPTO: UK Bank Santander Will Block Payments to Crypto Exchanges (link here)
BNPL: Klarna launches price comparison engine (link here)
LONG TAKE: Understanding the fall of FTX and attempted acquisition by Binance (link here)
PODCAST: Metaverse-native virtual artists and their financial ecosystem, with Hume CEO David Beiner (link here)
Here’s that handy upgrade button to access the Long Takes — a rigorous view on the future of our industry. Level up your Fintech and DeFi knowledge. 👇👇👇
In Partnership
Fintech Meetup: The BIG New Q1 Event! Connect, network, and learn at the BIG new fintech event of Q1 — incredible content, the latest tech, exhibit hall, and more. Plus a powerful tech-enabled meetings program that’ll connect 3,000+ attendees to 30,000+ double opt-in meetings. Don’t Miss Out! In person at the Aria, Las Vegas March 19-22.
Short Takes
INVESTING: a16z-backed Tellus wants to offer consumers a much better savings rate. Here’s how. (link here)
The national average APY is still sitting at 0.21%, despite sky rocketing rates. Fintech company Tellus is offering yields of 3.85% to 4.5% on savings balances, deposits form which in turn are used to underwrite residential real estate lending.
Founded in 2016, the firm provides loans for single-family-home loans in California (and soon the US), targeting homeowners looking to upgrade their home, but who don’t want to sell. Tellus charges 200 bps higher than traditional mortgage lenders, and so far has not witnessed any unusual default trends, as borrowers have been refinancing their loans.
Retail customers putting deposits into Tellus earn interest daily and receive financial education via the app, like budgeting tips and financial goal setting. However, over the past 6 years the company has only lent out $80MM with an average loan size of $2MM. That hasn’t stopped them from raising $16MM earlier this year from a16z.
Another interesting angle is that it finds much of its clientele through Instagram, TikTok, Google, and through partnerships with brokers. Our sense would be that depositors and borrowers here are two very different markets. Retail with small accounts on the savings side, and chunky home owners on the borrowing end. Earlier digital lender start-ups ended up giving up one side of the network, usually letting hedge funds and private equity fill up the balance sheet with capital to lend. Bootstrapping a two sided financial network is an expensive game.
👑 See related coverage 👑
CRYPTO: UK Bank Santander Will Block Payments to Crypto Exchanges (link here)
The UK branch of Santander is planing on blocking real-time payments to crypto exchanges in 2023. A limited set of restrictions will be enacted in the meantime, restricting users to £1k transaction limits and £3k over a rolling 30-day period. The changes are being enforced under the rationale of protecting costumers, and the case is stronger after the collapse of FTX. Santander is also blocking payments to Binance, as per the FCA’s ban on the CEX operating within the UK in 2021 due to it not being effectively supervised.
Currently, 47% UK banks have announced that they do not support crypto and the FCA is currently looking to amend rules around crypto advertising to bring it in line with advertising regulations for stocks and bonds. Despite the crackdown from banks and the FCA, the UK government set out plans to become a global cryptoasset technology hub in April this year. PM Rishi Sunak has also noted an interest in exploring the opportunities posed by the asset class. Notably, challenger bank Revolut is still pro crypto, launching a card that allows users to pay for goods and services in crypto. The service allows user to pay with over 1,000 tokens and earn cash back on purchases.
While this news shows bank reluctance to engage with crypto, self-custodial wallets like MetaMask can still be used to navigate Web3. The only real value from centralized exchanges is in the onboarding function, and that will eventually be removed. This also demonstrates the work needed for the UK government to put together a framework that protects users, while not limiting actual engagement with productive projects. UK lawmakers last month have been discussing how best to regulate crypto and plans to extend payments regulations to stablecoins.
👑 See related coverage 👑
BNPL: Klarna launches price comparison engine (link here)
Klarna launched a price comparison engine to rival Google shopping, as well as paving the way for the BNPL provider to become more of a venue for e-commerce. The tool will digest data from thousands of retailers across price, sizes, features, ratings, shipping options and colours to give users a view of product markets and a way to shop.
This positions allows Klarna to combine a go-to shopping location for users with the BNPL directly integrated into the service. The long-term potential is to capture a greater portion of e-commerce, and digi into merchant advertising for promoting products on their sales page, similar to Amazon. In the short-term, the revenue opportunity is in providing BNPL services on more purchases. The new feature was facilitated by Klarna’s acquisition of PriceRunner in April, a price discovery and comparison service.
We like the combination of commerce and finance using tech, bringing consumer intent closer to the financial product, and simplifying the user journey. Such models have seen success in China, although yet to have the same outcome in the West. Google and Amazon are the big competitors here — Google for their shopping comparison, which doesn’t connect BNPL yet (despite being offered on Google Store purchases and in-store with their AfterPay partnership), and Amazon with their e-commerce platform. For fintech to be big, it has to take on big tech!
👑 See related coverage 👑
Long Take: Understanding the fall of FTX and attempted acquisition by Binance (link here)
This didn’t happen, but the rationale for how FTX could have failed stayed the same. What created the black hole in the balance sheet? Check out our analysis, as we looked at why FTX wanted an acquisition buyout from its rival Binance.
We walk through the various ways that financial and capital markets companies fail in order to understand what is likely to have happened with FTX. We talk about leverage, liquidity crises, bank runs, comingling of client assets, and proprietary trading. Lastly, we highlight the systemic risks still present in the markets, and their potential scale.
Podcast Conversation: Metaverse-native virtual artists and their financial ecosystem, with Hume CEO David Beiner (link here)
In this conversation, we chat with David Beiner, Co-Founder and CEO of Hume – a web3 entertainment company pioneering music in the metaverse.
Hume’s community-building approach blends music, digital identity, and storytelling to develop virtual artists, or metastars. Hume goes beyond just the music and production of their virtual artist like ‘angelbaby’ — originally from the popular NFT collection FLUF WORLD— they thoroughly craft a rich backstory that embodies and humanizes their Metastars.
Rest of the Best
Here are the rest of the updates hitting radar.
PAYTECH: Former Tink employees launch Atlar, a payment automation startup
LENDING: Plend raised £40 million
EMBEDDED FINANCE: JP Morgan and Mastercard unveil Pay-by-Bank service
WEALTHTECH: Fidelity launches Hong Kong fund platform
INVESTING: Citi Ventures makes first fintech investment in India
INSURTECH: Hopper raises $96 million
INSURTECH: Lemonade’s Q3 2022 highlights
VR: NimbRo Wins $5 Million Avatar XPRIZE Driving Robot With VR Headset
Shape your Future
Wondering what’s shaping the future of Fintech and DeFi? At the Fintech Blueprint, we go down the rabbit hole in the DeFi and Fintech industries to help you make better investment decisions, innovate, and compete in the industry.
Read our Disclaimer here — this newsletter does not provide investment advice and represents solely the views and opinions of FINTECH BLUEPRINT LTD.
Want to discuss? Stop by our Discord and reach out here with questions