Fintech and DeFi Research Archive — The Fintech Blueprint

Explaining ~100x revenue multiples for Affirm, Checkout, Rapyd, and other fintech companies using systems theory

This week, we look at:

Over $1 billion in raises announced last week, and over $10 billion in Fintech company value creation: Checkout.com with $450 million at a $15 billion valuation, Affirm more than doubling after its IPO to $30 billion, lending enabler Blend raising $300 million, and payments enabler Rapyd raising $300 million.
A systems theory framework that explains the stocks and flows of goods and services, and what monetization strategies are available to fintechs
How transactional models are thriving and creating 50-100x revenue multiples

Who wins and loses in the Plaid/Visa divorce, and the $10 Billion in new Fintech SPACs (Spakkt and Spofi), with Will Beeson

In this conversation, Will Beeson and I break down a few important pieces of recent news — the SPACs for SoFi and Bakkt, and Plaid/Visa falling apart.

SoFi is going public with a SPAC deal worth over $8 billion. A few things we touch on in detail: (1) this is still largely a lender, (2) there is a gem of an embedded finance play called Galileo that SoFi owns, and (3) the multiple is a little over 10x T12 revenues, which is not crazy expensive, but not cheap.

Speaking of Galileo and finance APIs, we transition to Plaid, and how it is is not going to be one of the networks in Visa’s network of networks. Who wins and who loses in the equation? And last, we cover the Bakkt SPAC of over $2 billion and our view on its future.

acquisition, IPO / SPAC, embedded finance, paytech, digital lendingLex SokolinJanuary 15, 2021Bakkt, Plaid, Visa, SoFi, Galileo

Who are the customers of Embedded Finance, and what do they reveal about Stripe, Affirm, DriveWealth, and Green Dot?

This week, we look at:

Embedded finance as a growing theme with the $10B Affirm IPO and Stripe's launch of Treasury
The customer types that each of these firms is attempting to convert into their product, and what this tells us about economic growth
A framework for understanding the emerging value chain of digital finance, and the role of platforms and marketplaces

Google has come to Banking. What does that mean, and what should we do about it?

Google has done it. In a massive update to Google Pay, the company highlighted exactly the direction of travel for high tech, fintech, and the global banks. It has articulated a vision for competing with Apple Pay and Ant Financial. Let's walk through the features.

Will the Blockchain Economy run on Bitcoin, Ethereum, or Central Bank Digital Currency?

This week, we look at:

The Bitcoin money supply being worth as much as the M1 of several countries
The Visa/Plaid deal DOJ anti-trust filing and the PayPal integration of Bitcoin
Understanding Central Bank Digital Currencies in the context of card networks, payment processors, and digital economies
Chinese CBDC and how it could relate to stopping the $34B Ant Financial IPO
How a CBDC ecosystem is like an operating system, rather than a payment rail

crypto, macroeconomics, China, central bank / CBDC, paytechLex SokolinNovember 9, 2020Ant Financial, Bitcoin, Visa, Plaid, DOJ, PayPal, China, E-CNY / DCEP, Ethereum

The Harvard Endowment and alternative assets, Square buys $50MM of Bitcoin, Killer Mike launching a Bank and Akon building a $6B smart city

In this conversation, Will and I break down a few important pieces of recent news. MetaMask, the crypto wallet, hit 1 million month active users in yet another sign of the acceleration of retail adoption.

Square’s market cap is now equal to that of American Express, and the former also announced it has purchased $50 million of Bitcoin with its balance sheet. What do these pieces of news mean?

Greenwood Financial launched, a neobank led by Andrew J. Young, a civil rights legend, Killer Mike, a rapper and activist, and Ryan Glover, founder of Bounce TV network. How much scope is there for financial services for affinity groups instead of traditional geographical or product coverage areas?

crypto, neobank, paytechLex SokolinOctober 12, 2020MetaMask, Square, American Express, Greenwood, Bitcoin

Is Ant Financial the best Fintech in the world? Let's analyze the IPO!

In this conversation, Max Friedrich of ARK Invest, Will and Lex break down Ant Group’s highly anticipated IPO.

Ant, a spinout from Alibaba and the parent of Alipay, one of China’s leading payments companies, filed papers to IPO in Shanghai and Hong Kong.

Max, Will and Lex dig into Ant’s business, from the origins to today, discuss growth opportunities and potential headwinds and explore the multi-faceted relationships between Ant and other big tech companies and national governments.

We cannot understate how impressive Ant Financial has become, connecting 700 million people and 80 million merchants in China, with payments, savings, wealth management and insurance products integrated in one package. The company also highlights the likely road for traditional banks — as underlying risk capital, without much technology or client management.

China, big tech, digital investing, paytech, IPO / SPACLex SokolinSeptember 21, 2020Ant Financial, China, Alibaba, Yahoo, WeChat Pay, Square

Millions of users and millions in losses -- analyzing neobanks Monzo, Starling, and Revolut

In this conversation, we break down recently published annual reports from Revolut, Starling and Monzo, three of the leading European digital banks. There are some fascinating insights to be drawn from the documents, especially in the context of the broader global fintech market. This is rich subject matter, and we surely didn’t cover everything.

neobank, digital lending, paytechLex SokolinAugust 14, 2020Revolut, Starling, Monzo, Square, Goldman Sachs, Marcus, Tinkoff

Growth of brand banking, tragedy of OnDeck vs. Kabbage, and the Indian Fintech war between WhatsApp and WeChat

The fintech world is not taking the summer off. New developments are coming fast and furious, from fundraisings to product launches to government intervention.

Banking for brands startup Bond raised $32 million to capitalize on the exploding trend of B2B2C banking.

Samsung Money launched, leveraging SoFi’s infrastructure. As SoFi again seeks a national banking charter, they could become the de facto leader in this space.

Kabbage and Intuit launched small business bank accounts as extensions of their already deep relationships with SMBs.

And WhatsApp is trialing all sorts of financial services in India just as Chinese fintech super apps are being banned from the country.

Wirecard's collapse hurts Fintech & Crypto start-ups, like Lehman and Enron burned the economy

This week, we consider the impact of financial infrastructure collapse and who really gets hurt through the lens of Wirecard, Enron, and Lehman Brothers. Yes, there are investors in the entity that will lose value. But there are also clients and counterparties of Wirecard, like Curve, Revolut, and Crypto.com. In the case of Lehman, there was a $40 trillion derivatives notional amount that took twenty years to wind down. We also consider the most recent $500,000 hacking in DeFi of an automated market maker to see if there are common threads to be drawn between the two worlds.

WhatsApp Payments Halted in Brazil, Stripe competitor Checkout.com is Worth $5.5B, Upgrade raises $40MM

WhatsApp launches payments in Brazil and is unceremoniously shut down by the central bank a week later, MasterCard buys Finicity to protect itself against Visa’s recent acquisition of Plaid, Checkout.com continues its largely silent meteoric rise in payments, Softbank-backed and DAX 30 index component Wirecard “loses" $2 billion from its balance sheet and files for insolvency, Upgrade raises $40 million at a $1 billion valuation to extend its personal credit offering.

How to Build a $3.5B Profitable Digital Bank with Tinkoff

Oliver Hughes is the CEO of Tinkoff Group, one of the world’s most successful digital banking groups with over 10 million customers. This is one our most interesting conversation to date, full of fantastic operating advice.

Tinkoff is publicly listed with a $3.8 billion market capitalization, which brings clarity to its operating model in a time when many noteworthy consumer digital banks are pursuing customer acquisition at the expense of profitability.

Oliver has led Tinkoff through three financial crises, and brings experience and perspective to the current COVID crisis. This is a fascinating discussion about unit economics in digital banking and winning business models with a CEO with thirteen years of experience in this space.

neobank, paytech, digital lending, entrepreneurshipLex SokolinJune 19, 2020Tinkoff, Nubank, WeChat Pay, Russia, Capital One

Varo's $240M and Marqeta's $150M Rounds, Should Digital Banks Lend? and Fintech Gets Meta

Today, we talk through a few recent events that are indicative of what’s important in fintech right now.

Varo raised $241 million in preparation to start operating under its own banking license later this year. Is a banking license an asset or a liability if you’re a digital bank?

Marqeta is reportedly now valued at $4.3 billion, as banking-as-a-service continues its mature.

And LA-based fintech Stackin’ raised $13 million to scale its messaging-based offering designed to help Gen Z find the right fintech. What should we make of this?

neobank, paytech, embedded financeLex SokolinJune 12, 2020Varo, Marqeta, Stackin, Gen Z, Fiserv, Jack Henry, Curve, Tinkoff, TikTok, LendingTree

Cash App, Venmo, Digital Wallets and Challenger Banks with ARK Invest

Welcome back to the Fintech Blueprint / Rebank podcast series hosted by Will Beeson and Lex Sokolin. Max Friedrich is a fintech analyst a ARK Invest, a public markets investment manager focused on disruptive technologies including autonomous tech, robotics, fintech, genomics and next generation internet. Max recently published a report on digital wallets, including Venmo and Square’s Cash App, which is available for download on ARK’s website. In this conversation, we explain why Cash App has seen exponential growth.

neobank, paytech, eCommerceLex SokolinJune 5, 2020ARK Invest, Square, Venmo, WeChat Pay, Ant Financial, Samsung, Apple, Goldman Sachs, Zelle, PayPal, N26, Bitcoin, Gen Z

Libra, Stablecoins, CBDCs and the Need for Digital Money

A digital world needs digital money, and a few influential players are actively working to build it. China's BSN initiative and Facebook's Libra embody the East's public sector led approach to building and owning the internet of value and the West's private sector led (and public sector challenged) attempt at cheaper commerce on the web. While the nature of the approaches may be different, the data and privacy considerations are eerily similar. For all of our past episodes and to sign up to our newsletter, please visit bankingthefuture.com. Thank you very much for joining us today. Please welcome Lex Sokolin.

How are Central Bank Digital Currencies like Lithium-ion Batteries, and how do you build a CBDC today?

I examine the rising relevance of Central Bank Digital Currencies. We look at the World Economic Forum policy guide to understand different versions of CBDCs and their relative systemic scale, and the ConsenSys technical architecture guide to understand how one could be implemented today. For context, we also dive into a very different topic -- Lithium ion batteries -- and show how a change in the cost of a fundamental component part (e.g, 85% cost reduction in energy, or financial infrastructure) opens up a massive creative space for entrepreneurs.

Is Plaid cheap at $5.3 billion for $500 billion Visa?

I dig deeply into the $5.3 billion acquisition of data aggregator Plaid by $500 billion payments network Visa. We examine why this deal is worth 25-50x revenue, while Yodlee's sale to Envestnet was priced much lower. We also look at how Plaid could be an existential threat to Visa, and why paying 1% of marketcap to protect 200 million accounts may be a good bet. Broader implications for product manufacturers across payments, investments, and banking also emerge -- the middle is getting carved out, and infrastructure providers like Visa or BlackRock are moving closer to the consumer.

Fighting Chinese Artificial Intelligence with lasers and American Crypto with European Central Banks

How do the Americans and the Chinese have such different ethical takes on privacy, self-sovereignty, media, and the role of government? We can trace the root cause to the DNA of the macro-organism in which individuals reside, itself built over centuries and millenia from the collective scar tissue of local human experience. But there is more to observe. The technology now being deployed in each jurisdiction -- like social credit, surveillance artificial intelligence, monitored payment rails, and central bank cryptocurrency -- will drive a software architecture into the core of our societies that reflects the current moment. And it will be nearly impossible to change! This is why *how* we democratize access to financial services matters. We must be careful about the form, because we will be stuck with it like Americans are stuck with the core banking systems from the 1970s. But the worry is not inefficiency, it is programmed social strata.

Lessons from Uber's JUMP bikes on evolution in capitalism, Facebook's crypto money monopoly

Jump is an electric bike that is being distributed by Uber, and it just happened to be launching 350 of them in the London borough of Islington. You can rent a bike for 5 minutes at £1, and pay £0.12 per minute thereafter. That's generally cheaper than a taxi, on average more expensive than a public bike subscription. So why am I going on an on about these bikes? Two things come to mind as jumping off points for deeper discussion: (1) the incentives and tactics of economic organisms under capitalism to gather and retain attention, and (2) the monopoly powers of Uber and Facebook, leading to the impact of Libra's cryptocurrency on open competition, as well as the public responsibilities of supra national corporations.

marketing, big tech, philosophy, paytechLex SokolinJune 24, 2019Uber, Jump, Facebook, Libra / Diem, Ripple, SWIFT

$20 Billion TSYS acquisition in the shadow of Alibaba's $500B SME aggregation

I have been reading Alibaba: The House that Jack Ma Built this week, something everyone interested in understanding the future of Google, Goldman, Uber, or Amazon should do. The narrative starts with China's small business explosion, and Ma's genius is to tap into global demand for the products of those businesses through an online marketplace and associated financial services. But I am getting ahead of myself. Let's pause to acknowledge a massive, systemic transaction that was announced this week: payments processing company Global Payments acquiring TSYS (Total Payments Systems) for $21.5 billion.

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