What Hindenburg tells you: Cash App was "the only" electronic P2P payment processor mentioned in a COVID fraud indictment

What Hindenburg doesn't tell you (cut out of screenshot): The defrauded funds came via Bank of America which sent the criminal $1,256,108 in PUA benefits .. and the vast majority of those funds obtained via BofA was cashed out using

ATMs: $375,177
Bank branches: $39,180
BofA debit cards: $205,273

"Money Transfers/Funds Transfer services" *including* Cash App were responsible for $85,130, ~7% of total or ~12% of cashed-out funds

Pretty remarkable transparency from Acorns - "Given market conditions, we will be pivoting to a private capital raise at a higher pre-money valuation as we continue on our path to 10 million paid subscribers saving and investing for a better future."
finance.yahoo.com/news/investing… Now the reverse: Reuters reported Friday that Chime is preparing to IPO at a $40B valuation, a 60% markup from its last funding round at $25B in August '21. Chime denied the reports, GS declined to comment. If true, IPO could come as early as this spring.

nasdaq.com/articles/exclu…

(1) Multiple announcements last week in intersection of payments/e-commerce

Shop Pay -> Facebook

PayPal focusing on digital wallet w/ 'commerce', BNPL

Affirm targets "higher frequency purchases"

Common theme: Value prop. moving from conversion to demand aggregation/generation (long thread)

(2) First, Shop Pay expanding to Facebook platforms, @BlueToothDDS wrote the ultimate thread

https://twitter.com/BlueToothDDS/status/1359834862874726402

on this.

Beyond additional GMV monetization/value-add for merchants, one also can frame this as Shopify trying to capture consumer mindshare.

Last note on PayPal BNPL is pricing: PayPal's normal processing fee, undercuts other BNPL providers by up to ~50%.

@CharlieZvible points out that this doesn't matter as long as BNPL provider drives conversion, higher AOV etc. (great merchant quotes)

https://twitter.com/CharlieZvible/status/1361824434768777219

I would generally agree, but wonder

a. Does Affirm actually bring new demo (Afterpay yes)
b. What happens if PayPal (or Cash App offering BNPL, more below) has even higher conversion and brings even more demand (tens of millions MAUs, rewards system) + new demo, at lower price

In fintech Europe, everyone's talking about challenger banks. VCs poured $2+ billion in N26, Monzo, Revolut, Starling alone. Big press headlines.

Largely unnoticed, France's Lydia build a 4m user base by using P2P network effects instead of big VC money (roughly speaking). Lydia started out as a P2P payment app, not in banking. Lydia is used by a third of millennials in Frannce and has made it into the French vocabulary: "Je te fais un Lydia" is "I'll venmo you" 's equivalent. Lydia now offers various financial and other services - 'super app'.

Following up on last week's thread on Ant Group/Alipay's history, market and operating metrics

Let's look behind the headlines and big numbers and understand how consumers in China actually are using Alipay and WeChat Pay -- By going through @hongshenus's excellent recent paper.

https://twitter.com/mfriedrichARK/status/1300791752375390212

Remember, as @Kr00ney points out, that 80% of Chinese consumers use mobile payments (2018).

The data and anecdotal commentary presented in the paper is not only representative of Alipay/WeChat Pay's users, but of much of China's population.
cnbc.com/2019/08/29/why…

Last week, Ant Group (the company behind Alipay) filed for potentially the largest IPO ever.

If that doesn't make you listen, consider that in 2019, Alipay's payment volume was $16 trillion -- that's 12% more than China's GDP.

What's the deal with Alipay?

A (long) thread ⬇️⬇️ Let's start with a timeline of events.

Until 2011, Ant Group (or back then, simply Alipay) was part of Alibaba, China's largest e-commerce company.

Alibaba created the Alipay in 2003 to build trust between sellers and buyers, similar to how PayPal was key to Ebay's growth.

Payments is a low margins business everywhere in the world, but especially in China. Peer to peer (P2P) payments are free, while merchants pay significantly less for Alipay (mostly QR code) payments than cards.

The majority of mobile payments in China are P2P, meaning free. Goldman Sachs estimates that merchants pay around 60bps in China vs. 150-300bps in the US for card payments, and 38-60bps for third-party wallet payments (e.g. Alipay). Alipay retains 10-40bps net spread, vs. ~10bps for acquiring banks in a credit card transaction in China.

Square's Cash App apparently is testing a lending product that enables users to borrow $20-200.

So --- Borrowing 20 bucks from an app doesn't sound like a big deal?

It does.

Hint: The $27 billion payday lending market.

Thread ⬇️⬇️

techcrunch.com/2020/08/12/squ… It should not be a surprise that Cash App's first lending product targets the (by many called predatory) payday lending market.

Recall @jack's comments on last Square call: "We're looking for the most critical financial services that people haven't had access to in the past"

Square makes its first international acquisition for Cash App

Acquires Spanish and pan-European peer-to-peer payments app Verse (@joinverse) for an estimated EUR30-50 million ($34-53m)

Never heard of Verse?

A thread ⬇️

https://twitter.com/GeorgeOfARK/status/1272574198314160129

Short take:

Gives Cash App ability to expand across Europe. Verse has payment license for European Economic Area (31 countries) via Bank of Lithuania.

Square says will keep biz operations separate, first "learn from each other"

Verse for now unmonetized, focus on free P2P

Cash App likely will operate at a $1B revenue run rate as of Q2'20.

Time it (likely) took Cash App, Square's 'side business', to go from $100M to $1B in annualized revenue: 2.5 years.

Time it took Square's seller ecosystem to go from $100M to $1B in annualized revenue: 5 years. Revenue run rate (aka annualized revenue) means in this case multiplying current quarter revenue times four.

Cash App isn't growing faster because it's growing from a lower base - It's growing at 2x seller's historic growth rate on an 'apples to apples' ($100M to $1B) basis.

Square is starting to integrate @CashApp into its loyalty program

As captured by @caseymeekMD (below), points and rewards will be accessible via Cash App

Seems pretty straight forward

But could have big implications for customer acquisition in both ecosystems

Short thread ⬇️ There likely is low geographic overlap between Cash App users and SQ POS merchants

Therefore, loyalty via Cash App could drive
1 Cash App adoption in SQ merchant regions
2 SQ merchant adoption in Cash App regions

See chart below (using Google Trends and US Census data as proxy)

How MercadoLibre is revolutionizing SME lending in Latin America with alternative data and ML

Thread reviewing the Bank of International Settlement's paper on Fintech & BigTech lending

bis.org/publ/work779.p…

⬇️⬇️⬇️

(1/15) Lending was a cumbersome process for many SMBs before the likes of Square Capital, Stripe Capital, Shopify Capital etc

Check out this list of requirements by the US Small Business Administration to obtain a loan. Plan a few weeks to work that off

sba.gov/sites/default/…

(2/15

We think Cash App crossed 30 million MAUs in recent weeks and ended 2019 with 29 million MAUs, up from 15 million in 2018 and 7 million in 2017.

Venmo, according to our model based on Venmo's API, crossed 25 million MAUs in late 2019.

How did we arrive at those numbers?

⬇️⬇️⬇️ Venmo's API gives us unique insight into Venmo's growth, as we'll show in a forth coming whitepaper in more detail.

We found strong correlation between Google Search Data and Venmo's monthly sign-ups from we know from the API, as can be seen below. R² of 0.988.

Amazon Pay just unveiled a bill pay feature at #Money2020

Users can ask Alexa "Alexa, when is my bill due?", get info, Alexa might even compare with prior months, then offer user to pay the bill

https://twitter.com/amazonpay/status/1188609436337750017

.@PRGauthier mentioned that 68% of bill-payers are not signed up for auto bill pay b/c they want to track their consumption and might have to prioritize bill payments. Still, high % of bills are not payed b/c people forget about them. Alexa could solve this dilemma.

We spent the summer scraping Venmo's public API, enabling us to get an unprecedented real-time as well as historic read on Venmo's growth and user dynamics.

Below a summery of our findings.

We'll follow up with a more in-depth paper in the coming weeks.

ark-invest.com/research/venmo… We believe that the no. of annual active Venmo users grew from 40 million at 3/31/19, as reported by PayPal, to close to 50 million by end of Sep.

Venmo thereby likely has the largest no. of deposit account customers in the US. (JPMC's ~52m includes non-deposit products)

/2

Thread: How will Libra (L) reach mass adoption?

Many this week pointed out that L will scale on FB's 2.3b users.

But: Large user base != automatic adoption. Instead, (payment) networks have to incentivize users to join. Unclear yet how L will incentive users to join.

1/9 Facebook has been allowing payments on its Messenger platform since 2015, arguably without breakthrough success. If users didn't use Messenger payments back then, would they now start using them only because Libra is a cryptocurrency?

techcrunch.com/2015/03/17/fac…

2/9