Fintech meets crypto #8

Crypto in the cross-border payments, fintechs are still getting tons of money and 'Crypto Thesis for 2022'

Dec 20, 2021

Hey 👋

Welcome to “Fintech 🤝 crypto” - episode #8.

This is the final “Fintech meets Crypto” post of 2021. My plan for the final weeks of 2021 is to spend some quality time with my family and catch up on some reading. Relax, zoom out. Get more energy for 2022.

It’s been a crazy year. Fintechs got tons of money, crypto got into the mainstream (with NFTs, web3 concept and DeFi), more and more people are going down the web3 rabbit hole and they do not want to come back, I tell you that.

It’s been an amazing year for me too.

I started this newsletter because I felt I needed to organize my thoughts and knowledge. I started it because I wanted to have a routine of collecting the most important fintech x crypto news and great reads.

I did it mostly for myself and then I thought - hey, maybe there some other fintech folks that are interested in this new, emerging crypto ecosystem - just like myself. And this turned out to be true.

Thank you for reading, sharing, and contributing to this newsletter. Every week new readers are signing up which makes me extremely happy. Thank you so much!

Anyway, “Fintech meets crypto” will be back in January, but until then Happy Holidays! 🎁

If you want to get new episodes directly into your mailbox, hit the button below:

Chris Dixon @cdixon

If you don’t get pushback from the establishment, it’s not the frontier.

Let’s go! 🚀

Weekly theme - Crypto adoption in FIs 🤔

If you were to guess how Financial Institutions (FIs) across the globe are thinking about cryptocurrencies, what would be your first answer?

Does the majority of FIs plan to introduce crypto in their portfolio or maybe they are still hesitant?

Are we just witnessing the new market creation? Fast account-to-account payments are nice, mobile wallets are pretty cool, tokenization is still a great force behind many of the payment solutions, but what about crypto?

How does TradFi (traditional finance) see it?

The answers to these questions (and more) can be found in the report created by PYMNTS.com and Circle:

Cryptocurrency, Blockchain and Cross-Border Payments 📖

It explores cryptocurrency and blockchain adoption in the context of cross-border payments.

If you have some spare time, go and read the whole thing!

If you don’t, here are the key points & graphs for you to digest:

👉 What cryptocurrencies are being used by multinational FIs currently?

Key takeaways ✏️

More than half of businesses now use at least one form of cryptocurrency.
Bitcoin is the most widely utilized (31%), followed by stablecoins (29%) and ether (24%).
Ether may catch up to bitcoin: 21% of respondents currently do not use ether but would like to vs 16% who say the same for bitcoin.

👉 Cryptocurrencies usage vs annual revenue:

Key takeaways ✏️

Larger multinational businesses currently are more likely than smaller ones to use cryptocurrency.
81% of businesses generating at least $1 billion in annual revenue use at least one cryptocurrency.

👉 There is a huge gap between market needs & what FIs are offering

Key takeaways ✏️

Listen to this: just one in 10 FIs is currently offering its B2B customers the ability to use cryptocurrency, despite huge interest among clientele.
If the company is not offering cryptocurrency right (light purple), the results show that only 4% would like to introduce this payment method in the next 12 months. 76% answered "maybe” and 20% - “no”.
This lack of enthusiasm contrasts sharply with what can be observed among FIs that already offer cryptocurrency access - almost 73% of these plan to offer their customers access to additional cryptocurrencies in the next 12 months.
In short: the companies that already have taken the leap into crypto, see continued strong interest among their customers and plan to expand these services.

👉 What are the most important cryptocurrency services?

Key takeaways ✏️

Fintechs see “Access to cryptocurrency” as the most important service for their clients.
Banks think that “Payment acceptance” is the key functionality for their customers.
If you look at the table below you will quickly see that these two options - payment acceptance and access to cryptocurrency - are very close to each other (% both for banks & fintechs) which is not a surprise.
Fintechs & banks will start the cryptocurrency “roll-out” to solve these two use cases:
- the client wants to access the cryptocurrency via their banking/financial app;
- the client wants to pay with the cryptocurrency;
Seems relatively simple but most of the FIs are months away from providing these solutions to their customers. This is a new, huge market for new fintech players that would like to offer these solutions to incumbents.

👉 Key use cases of DeFi

Key takeaways ✏️

DeFi smart contracts that trigger payment (42%) and cross-border payments (37%) are the leading cryptocurrency and blockchain use cases among global firms.
There is a strong correlation between the share of companies that use DeFi and the number of countries in which they operate. The more countries in which a firm operates, the more likely it is to use cryptocurrency and blockchain for these purposes.

Happened last week 👀

1) Ledger Launches Crypto Debit Card 💳

In short:
- Crypto hardware-maker Ledger announced on Thursday the launch of a debit card that will let users spend their crypto directly or use it as collateral for cash purchase.
My comment:
- This is huge news! Ledger is one of the most popular hardware crypto-wallets (the other was is Trezor). This news means that finally there is a direct link between hardware crypto wallets & plastic cards.
- As for the debit card, users will be able to transfer funds to it via the Ledger Live platform, which connects to Ledger devices via either cable or Bluetooth, depending on the device.
- The card is branded Crypto Life and relies on the Visa network to carry out transactions. That’s a very smart move by Visa 👏
- What’s the end-game for Ledger? Its CEO - Pascal Gauthier - says:
  - "In the same way, as the iPhone is a platform for Web 2, Ledger is for web 3”.

2) Pleo raised $200M at $4.7B valuation to build the next generation of business expense management 🔥

In short:
- Danish startup Pleo, a developer of expense management tools aimed at SMBs to let them issue company cards and better manage how employees spend money, has raised $200 million.
- Pleo was valued at $1.7 billion; now it is $4.7 billion, making it one of the most valuable fintech startups in Europe.
My comment:
- What can I say. Fintech is still on 🔥 and investors still want to put a lot of money in this sector.
- Last week there were 2 other news about funding rounds 💰💰💰
  - Monzo raised $500M (valued at $4.5B)
  - Mambu raised $266M (valued at $5.5B)

3) Klarna launches browser extension with payments 🧐

In short:
- Klarna launches a browser extension that brings interest-free shopping at all online stores to the desktop regardless of whether they are partnered with Klarna or not.
My comment:
- Super smart move by Klarna. This way even if the merchant is not offering Klarna at the checkout, the consumer can still use Klarna BNPL solution.
- I can imagine other BNPL companies, like Affirm & AfterPay, will follow this path.

4) WhatsApp launches cryptocurrency payments pilot in the US 🇺🇸

In short:
- WhatsApp has launched a new pilot that lets a “limited number” of people in the US send and receive money from within a chat using cryptocurrency.
- The feature is powered by Novi, Meta’s digital wallet that launched as a pilot six weeks ago, with payments made using Pax Dollars (USDP).

Stephane Kasriel @skasriel

There's a new way to try the @novi digital wallet. Starting today, a limited number of people in the US will be able to send and receive money using Novi on @WhatsApp, making sending money to family and friends as easy as sending a message. 💸💬

My comment:
- Well, on the one hand - it’s good news if you are thinking about crypto adoption. WhatsApp (owned by Meta) offers a possibility to pay in stablecoins in the app. That’s pretty neat.
- On the other hand - the user can only pay in Pax Dollars (USDP), not in the most popular stablecoins like Tether (USDT), Dai or USDC, or top cryptocurrencies (Bitcoin, Eth).
- It’s a good first step though. I can imagine more SuperApps (from all over the world) will start offering similar functionalities in 2022 👀

5) Coinbase allows customers to earn DAI interest 🤑

In short:
- Coinbase makes it possible to earn DeFi yield on Dai, a stablecoin that is designed to be pegged to the US Dollar.
My comment:
- It’s a great example of DeFi services moving (slowly but steadily) into the mainstream.
- Right now accessing DeFi protocols can require expensive network fees and involve a somewhat complex user experience. Coinbase is making DeFi more customer-friendly and accessible.
- The offered APY varies based on the rates from Compound. As an example, during the months October-November, the APY for supplying DAI fluctuated between 2.83% and 5.39%. Right now it’s 4.42%. Much better than in the traditional banks.
- FinTech in the front. DeFi in the back. Protocols are the new banks.
  source: Bankless “The Defi Mullet”

Great reads worth your time 📚

📗 Crypto Theses for 2022 (by Messari)

If there is one thing you should read this year, this is it.
Messari yet again has published “Crypto theses”, this time for the year 2022. They are doing this every year so one can say it’s a tradition right now.
This is the most comprehensive and informative report about the state of Crypto & DeFi market in 2021 and predictions about 2022.
This is a definite must-read! It’s not short, but the Holidays season is coming so you should have some free time to go through this report ;-)

📕 A Normie’s Guide to Becoming a Crypto Person (by Sara Harrison — NYMag)

If you are super new to the DeFi & crypto space - this is the article you need to read. It will make your life easier and these weird acronyms, words & jargon will become understandable for you.
Or if you have a friend who wants to go down the rabbit hole, this is a good starter.

📘 Fintech’s Fraud Problem: Why Some Merchants Are Shunning Digital Bank Cards (by Eliza Haverstock, Jeff Kauflin — Forbes)

Really interesting piece about challenger banking's dirty little secret: its fraud problem.
Products like Chime, Cash App, and PayPal make signing up easy - making them easier for criminals to exploit as well.
Many merchants are aware of the problem and some of them (e.g. car rental companies, hotels) stopped accepting cards issued by the challengers. Which makes their customers really unhappy, as you can imagine.

Gold Tweets 🏅

Short summary of “crypto mainstream things” that happened in 2021. I would add to this list:
- Square rebrands to “Block”
- McDonald’s introduces McRib NFT Project
- Pepsi releases Pepsi Mic Drop NFTs