Fintech Digest

The Former PayPal’s CEO Startup Shuts Down

The previous week in fintech was jam-packed with events, so get ready to strain your gyrus. We will try to be as brief as possible where it is possible.

Top News | 14.11-20.11

  • The former PayPal's CEO startup shuts down
  • Klarna CEO says the BNPL sector deserves more respect
  • JP Morgan craves more innovation
  • Visa wants to make a splash with its new technologies
  • FTX abused client funds
  • Klarna «adds rocket fuel to the innovation process»
     …and launches a new service
  • Revolut demonstrates an enviable growth
  • US tests digital dollar
  • TikTok teaches financial literacy (or conversely, illiteracy)
     …and American Express takes advantage of it
  • Ethereum to become more climate-friendly, thanks to Microsoft

The Former PayPal’s CEO Startup Shuts Down

Startup Nirvana Money was officially launched last month. Back then the former PayPal and Intuit CEO Bill Harris promised to bring to market a hybrid product that combines credit and debit cards in one. Last week, a short message appeared on the startup's website announcing the startup shutting down in less than a month after its launch.

The project aimed to simplify the mechanism by which people earn money, save and spend it. The company located its headquarters in Miami and hired up to 50 staff. It was supposed to increase the personnel to 200 workers by 2022.

Despite Harris's belief in the project's success, its concept has proven incompatible with current realities, when the market is in recession and interest rates on loans are growing.

Good news is that no one — neither clients nor investors — has lost their money, except Harris himself.

Klarna CEO Says the BNPL Sector Deserves More Respect

The CEO and co-founder of Swedish fintech startup Klarna, Sebastian Siemiatkowski, feels Klarna is receiving unfair media attention compared to credit card companies.

In his tweet, Sebastian said that large media outlets profit from credit card advertising but at the same time warn their readers against using BNPL services.

One of the series of tweets included a link to a piece by American technology website CNET about tips for «smarter» shopping during the holiday shopping season.

In terms of credit cards, the article suggests a 0% introductory APR credit card may be an excellent alternative if you're looking for a new credit line and need time to pay off your bill. It also recommended that you use a rewards card, which may allow you to receive cash back for every dollar spent. However, the piece urges caution when it comes to BNPL services.

The article also mentions Klarna and other firms that provide an upgraded version of the installment plan and says there are «pitfalls» in their services, «especially if you pay late».

It's unclear if Klarna's CEO is accusing media outlets of pushing credit cards that advertise in their publications. However, he correctly said that BNPL is a service that should be avoided if you are unsure that you will be able to make the payments on time.

JP Morgan Craves More Innovation

In Athens, Greece, JP Morgan is opening a payments innovation lab. It will focus on global payments research and development in collaboration with Onyx, a branch of Onyx that specializes in emerging technologies such as blockchain.

Initially, the center's activities will revolve around the creation of solutions for payment systems that employ distributed ledger technology, artificial intelligence, and cryptography.

The new Athens headquarters will accommodate staff from the firm's corporate and investment banking, asset and wealth management. That's about 50 employees in total.

Visa Wants to Make a Splash With Its New Technologies

Taking advantage of its status as the official Fifa World Cup payment technology partner, Visa is using the event to show off some of its latest technologies, such as face payments and instantly-issued prepaid cards with animated art. The tournament began in Qatar on Sunday.

To reach out to the more than one million fans expected to attend the tournament, the company has installed 5,300 contactless-enabled payment terminals at venues. Besides, it also provides an opportunity to test the face payments technology in several coffee shops and pay in taxis with tap-to-pay technology.

In addition, the company has established commercial agreements with local banks, allowing small and medium-sized enterprises to accept contactless payments using NFC-enabled Android devices. 

FTX Abused Client Funds

Sam Bankman Fried's empire, once valued at $32 billion, misappropriated customer funds, according to the new CEO of the bankruptcy cryptocurrency exchange FTX. The firm has no legitimate financial statements, and management has little control over what happens there.

According to John Ray, the man who took over at Enron after its collapse and is now in charge of FTX, the crypto exchange didn’t keep proper accounting records. There were no safeguards in place to protect customers' digital assets, and company funds were spent on purchases of real estate and personal items for employees and consultants. Payments were approved through emoji posts on the corporate messenger Slack. 

Mr. Bankman-Fried often used messengers with automatic message deletion and urged staff to do the same, and the FTX management preserved no record of purchasing decisions made.

That said, Ray also has no confidence in the balance sheets of FTX's sister firm, Almeda Research. It should be mentioned that the total assets and liabilities of International and U.S. FTX, as well as Alameda, were estimated at between $10 billion and $50 billion in the bankruptcy filing.

Klarna «adds Rocket Fuel to the Innovation Process»

Klarna Kosma, the division of the namesake Sweden fintech company, which deals with Open Banking technologies, has launched an initiative to assist entrepreneurs in developing Proofs of Concept. This is a demonstration of the feasibility of any method, idea or technology in e-commerce, data analytics and fintech.

The «autopilot» initiative will allow companies to access all Klarna Kosmo products and 15,000 banks for free for three months.

The company's leadership expects that by providing participants with a sandbox in which to build zero-cost solutions based on the world's largest banking platform, their effort will stimulate even more innovation in Open Banking.

…and Launches a New Service

Klarna has introduced a price comparison tool. It lets consumers compare prices across thousands of retailers and filter them by a dozen features: color, size, customer ratings, in-store availability and delivery options.

Klarna says the solution is a solid alternative to Google or Amazon, and naturally opens up a new revenue stream for the company.  

The tool sorts product results by price, making it easier for customers to find the best prices on any product. Whenever a customer visits a product page, the price comparison engine displays if stores are providing a cheaper price or the ratings associated with items. During the checkout process, a pop-up window will automatically hunt for and apply available discounts to further reduce the price of their selected items.

Following its debut in the United States last month, Klarna’s tool is now accessible to Klarna App users in the United Kingdom, Sweden, and Denmark.

Revolut Demonstrates an Enviable Growth

Fintech startup Revolut has attracted 25 million customers worldwide. Amid this news, the company announced the launch of its super application in India, Mexico, Brazil, and New Zealand soon.

It should be mentioned that the company reported reaching 20 million customers in July. 

As for the business, to date, Revolut has launched 20 new products and processed transactions worth more than 110 billion pounds. In addition, the company claims to attract more than 2,000 new companies to its super app every week.

US Tests Digital Dollar

Members of the U.S. banking community are collaborating on a proof of concept for a regulated digital asset settlement platform.

Using distributed ledger technology, the proposed platform would enable novel potential to enhance financial settlements between central banks, commercial banks of all sizes, and regulated non-banks.

The 12-week proof-of-concept (PoC) will test a version of RLN that operates exclusively in US Dollars, where commercial banks issue simulated dollar tokens representing their customers' deposits, and settle through simulated central banking reserves on a shared multiplatormarket.

Additionally, a proof of concept will test whether programmable digital money is feasible, as well as whether it is legal and regulated under current laws.

A test environment will be used for this project, and only simulated data will be used. It's not meant to advocate any specific policy results, nor does it imply that the Federal Reserve will make any immediate judgments on the viability of retail or wholesale digital money, or how it would be created. When the pilot study is finished, the results will be made public.

Participants in this Proof of Concept will collaborate with the New York Innovation Center (NYIC), which is part of the Federal Reserve Bank of New York. NYIC collaborates with the commercial and governmental sectors to enhance the global financial system's functioning and central banks' capacity to accomplish their objectives.

The following financial institutions and payment organizations are also participating in this project: BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, US Bank and Wells Fargo. Digital assets are powered by Amazon Web Services and provided by SETL.

Swift, a global supplier of financial communications services, is also involved in an endeavor to enhance interoperability throughout the global financial ecosystem. Sullivan & Cromwell LLP will offer legal services, and Deloitte will provide advising services.

TikTok Teaches Financial Literacy (or Conversely, Illiteracy)

TikTok is now more than dancing, competitions, fashion trends and memes. Now people turn to this social network for financial advice. At least the British generation Z.

According to a recent survey of 1,000 young Britons ages 18 to 14, 58 percent of them follow influential TikTok users who talk about budgeting, money or personal finances. Those surveyed also find advice from the app's Influencers more valuable than advice from traditional media, friends or even financial agents.

Almost half of respondents believe TikTok influencers have assisted them in making a financial decision, such as investing in stocks and shares, Isas, or choosing a mortgage.

41% are more likely to trust entertaining influencers, while 35% are more likely to trust those who are relatable. Furthermore, 38% of Gen Z feel influencers have earned credit if they have previously provided suggestions that have aided them.

…and American Express Takes Advantage of It

U.S. payment service American Express has announced a partnership with the social network TikTok. Its purpose is to assist small business owners in reaching the next generation of buyers on this viral video platform.

During the upcoming New Year's season, AmEx's #ShopsMall gas pedal will offer small business owners the opportunity to earn a $100 TikTok advertising credit in exchange for purchasing $50 worth of TikTok ads.

Furthermore, small business owners can use the tools and resources on the platform to boost their sales. TikTok influencers won’t stay aside: they will carry out a crash course on using TikTok as a search engine for their commerce and how to facilitate interaction with their users better.

Ethereum to Become More Climate-Friendly, Thanks to Microsoft

Technology giant Microsoft is launching the Ethereum Climate Platform (ECP).  With this endeavor, Microsoft hopes to lessen the carbon footprint left by Ethereum's proof-of-work (PoW) network since its inception in 2015.

ECP is focusing on reducing previous emissions, whereas Ethereum's 'merge' will make it far more climate-friendly in the future. Since its «birth», Ethereum has accumulated a carbon debt in the tens of millions of metric tons.

It aims to reward and assist the development of projects that reduce greenhouse gas emissions while benefiting the environment and society.

The coalition's founders include Microsoft, Polygon, Aave, Enterprise Ethereum Alliance, Global Blockchain Business Council, Huobi, and Laser Digital, and software company ConsenSys and blockchain business Allinfra lead it.