This Week In Payments 01/20/2021

Guest :Jesse Randall CEO of Sweater Ventures
Top Stories :Jack Ma reappears and failed Ant Group IPO
Visa Calls it Quits with Plaid Inc. Acquisition
Capital One FIned $390 billion
PPro becomes FIntech's newest Unicorn with a $180 million capital raise
Equifax Set to acquire Kount for $640 million
In Other News:PayPal has bought the remaining 30% of the Chinese payments firm GoPay
Pakistan government announces new instant digital payment system
Gemini Acquires Blockrize, Announces Credit Card With Crypto Rewards. 
Blackbird, AeroPay Team For Online, Cashless Cannabis Ordering
Transcript (Auto Generated):
Tedd Huff: [00:00:00] [00:00:00]You are now listening to Ted talks payments. Bringing you, the people tech and companies, that change how you pay, and get paid. 
Welcome to this week in payments for January 21st, 2020. I'm your host, Tedd Huff.
 We are only two weeks into the new year, and we already have some crazy stories around IPO's and FinTech. We brought in Jesse Randall the CEO [00:00:30] of sweater to talk us through his perspective on a couple of these big items and what it means for the future of fintech.  
 First I want to cover. The ant group and Jack ma. 
Now many of you know that Jack MA's been out of the limelight since November, when the Chinese government regulators decided they were going to investigate the IPO
 Now him coming out may be a good sign for him, but the ant groups failed initial public offering continues to wreak havoc on the [00:01:00] markets. 
 The wall street journal reported Tuesday, January 19th, that investors have drained over $3 billion. Yes, 3 billion with a B from the funds led by five mutual funds that had pitched themselves as a way to get on board as the FinTech went public. 
 Since having it's estimated 37 billion IPO derail by Beijing earlier in November, the ant group is seeking to overhaul their operations and comply with all of those government regulations for the [00:01:30] Chinese market. 
Now, one of the things that's interesting is the Chinese investors aren't all about diversifying their portfolio. They like to get in on the really hot IPO's, which is slightly different than what we've got going on here in the U S .
 Talking about IPO's move over to one of the most publicized, planned acquisitions. To happen in 2021 and not to be left out by regulators.  Visa, Inc just one year after announcing  planned [00:02:00] acquisition of the technology from plaid, Inc for $5.3 billion, they just abandoned it.
Now it wasn't just for the, grins and giggles. The justice department filed an antitrust lawsuit. The challenge to deal. And they filed that on November 5th. So it's only been a couple months since they got to that point. the good thing is that plan hasn't let this hold them back. They just announced this week that they plan on doubling the size of their European offices to continue the growth [00:02:30] in their global reach.
We are just getting started talking about all the different things with federal regulators.
 FinCEN, fined capital one for $390 billion for their check cashing group for behaving badly buying gauging in both willful and neglect.
Through the violations of the bank secrecy act. capital one, didn't try and hide this. They admitted to failing to file for currency transactions on approximately 50,000 reportable cash [00:03:00] transactions that represent over $16 billion in cash handled by its check cashing customers. The kicker is that it didn't even happen anytime recently.
it lasted for over six years. started as early as 2008. And as recently as 2014 to manage some of the blowback from FinCEN capital one shut down the network and a number of remediation efforts related to the suspicious activity reports, currency, transaction reporting, filing systems, and money...

Guest :

Jesse Randall CEO of Sweater Ventures

Top Stories :Jack Ma reappears and failed Ant Group IPO Visa Calls it Quits with Plaid Inc. AcquisitionCapital One FIned $390 billionPPro becomes FIntech's newest Unicorn with a $180 million capital raiseEquifax Set to acquire Kount for $640 millionIn Other News:PayPal has bought the remaining 30% of the Chinese payments firm GoPayPakistan government announces new instant digital payment systemGemini Acquires Blockrize, Announces Credit Card With Crypto Rewards. Blackbird, AeroPay Team For Online, Cashless Cannabis Ordering

Transcript (Auto Generated):

Tedd Huff: [00:00:00] [00:00:00]You are now listening to Ted talks payments. Bringing you, the people tech and companies, that change how you pay, and get paid. 

Welcome to this week in payments for January 21st, 2020. I'm your host, Tedd Huff.

 We are only two weeks into the new year, and we already have some crazy stories around IPO's and FinTech. We brought in Jesse Randall the CEO [00:00:30] of sweater to talk us through his perspective on a couple of these big items and what it means for the future of fintech.  

 First I want to cover. The ant group and Jack ma. 

Now many of you know that Jack MA's been out of the limelight since November, when the Chinese government regulators decided they were going to investigate the IPO

 Now him coming out may be a good sign for him, but the ant groups failed initial public offering continues to wreak havoc on the [00:01:00] markets. 

 The wall street journal reported Tuesday, January 19th, that investors have drained over $3 billion. Yes, 3 billion with a B from the funds led by five mutual funds that had pitched themselves as a way to get on board as the FinTech went public. 

 Since having it's estimated 37 billion IPO derail by Beijing earlier in November, the ant group is seeking to overhaul their operations and comply with all of those government regulations for the [00:01:30] Chinese market. 

Now, one of the things that's interesting is the Chinese investors aren't all about diversifying their portfolio. They like to get in on the really hot IPO's, which is slightly different than what we've got going on here in the U S .

 Talking about IPO's move over to one of the most publicized, planned acquisitions. To happen in 2021 and not to be left out by regulators.  Visa, Inc just one year after announcing  planned [00:02:00] acquisition of the technology from plaid, Inc for $5.3 billion, they just abandoned it.

Now it wasn't just for the, grins and giggles. The justice department filed an antitrust lawsuit. The challenge to deal. And they filed that on November 5th. So it's only been a couple months since they got to that point. the good thing is that plan hasn't let this hold them back. They just announced this week that they plan on doubling the size of their European offices to continue the growth [00:02:30] in their global reach.

We are just getting started talking about all the different things with federal regulators.

 FinCEN, fined capital one for $390 billion for their check cashing group for behaving badly buying gauging in both willful and neglect.

Through the violations of the bank secrecy act. capital one, didn't try and hide this. They admitted to failing to file for currency transactions on approximately 50,000 reportable cash [00:03:00] transactions that represent over $16 billion in cash handled by its check cashing customers. The kicker is that it didn't even happen anytime recently.

it lasted for over six years. started as early as 2008. And as recently as 2014 to manage some of the blowback from FinCEN capital one shut down the network and a number of remediation efforts related to the suspicious activity reports, currency, transaction reporting, filing systems, and money [00:03:30] laundering programs over the last few years.

 Let's talk about some really good stuff 2021 is been full of acquisitions and capital raises, especially in FinTech and payments.

Just this week, June 19th of 2021 PPro a trusted infrastructure provider in cross border international for payment service providers, such as city Elevon, MasterCard, Mollie, PayPal, and Worldpay. And they just announced. That they received [00:04:00] $180 million investment and this is only months after a $50 million round.

 Simon Black the ceo of PPro said that beyond securing the support from such prestigious investors and achieving the milestone valuation,  they reached the $1 billion evaluation, that they plan on giving their customers the ability to continue to grow and have helped people all around the world have better access to goods and services and improve their lines. 

 Not to be out done Equifax. And announced, it's [00:04:30] intent to snap up Boise, Idaho based e-commerce fraud prevention platform Kount for $640 million. Now this follows a purchase of innovation by rival company, TransUnion, which you might know of.

 Mark Begor. The CEO of Equifax said as the digital migration accelerates managing authentication and online fraud will optimize the consumers experience has been one of their customer's top challenges. And this acquisition of count will expand and [00:05:00] differentiate those products for Equifax.

Those are the big items, but we've still got a handful of other things that are out in the news today.  

PayPal bought the remaining 30% share of Chinese payments from GoPay. Now on the surface, that doesn't seem that significant, but PayPal bought 70% of GoPay last year and this license for online payments in China.

Not knowing the details of the deal, but PayPal pal did say it's target is across border payments, connecting Chinese to the global network. [00:05:30] And they even mentioned this in their 2019 report. So this shouldn't be too much as a surprise. keeping in the international area, we're also going to be talking about Pakistan.

Just announced a new system called Raast. or "Direct Way" for instant digital payments that also be run by the government and it's still to be found what would be going on, this will be a really big for that area. It's being supported by the world bank. Britain, United nations and a handful of other folks for involvement of women in a formal economy.

It's going to be really big in that [00:06:00] area to jump over to something even more fun, a little bit more controversial with Bitcoin jumping as much as it has recently, it's really interesting to see the cryptocurrency exchange of Gemini. Announced last Thursday, January 14th, that it's going to be offering a cryptocurrency rewards card after its acquisition of Bach rise.

this is a 350 companies. Start-up that Jim and I acquired And this will, according to the Gemini CEO, Tyler [00:06:30] Winklevoss rather than deciding how and when to buy crypto customers are going to be able to do so while making their everyday purchases with this card.

Cannabis is a big deal, especially here in the U S we're trying to figure out different ways to purchase the products with it being not legal to federal level, but legal at the state levels in some areas. Because the industry's federal status being an illegal one and traditional card payments, not being an option. Most of the banks don't do business with cannabis businesses for that [00:07:00] reason .

 Blackbird teamed up with arrow, pay for online cashless cannabis ordering. this software. Is going to tie everything together for them. Blackbird is going to white label aero pays payment platform. Blackbird customers will have access to the online prepay option ordering their items or curbside pickup  and the payments made with Aero pay will be funneled into secure and so with this here, this is really going to help those cannabis businesses really get in to the electronic payments [00:07:30] area.

And without further ado, Jesse, let's jump in and start talking about the thing that you and I were going back and forth with late last week is, you're, you've had interactions as being a FinTech founder, and you all have your own. Startup going on right now, you had mentioned that visa and there decided to not fight the regulators is going to have an [00:08:00] impact on not only startups, but FinTech in general.

Jesse Randall: [00:08:03] Oh yeah. This is this is an exciting cultural moment for FinTech, I think. 

Tedd Huff: [00:08:08] Why don't you for everybody that's on and listening? Just do a quick example of what your latest startup is and how you see this visa cancellation I can't believe I'm saying this out loud, but the cancel culture, really hitting visa and what that means for you and your startup.

Jesse Randall: [00:08:25] Cancel culture, how we could wrote that into that makes things spicy.

First, let me say, I love [00:08:30] FinTech. FinTech is still truly in its infancy. If you ask me, if you look at the SAS industry, I feel like SAS has matured to a point where. There's not a lot of new places to go, but FinTech, is just opening the door and there are huge implications across the entire spectrum of FinTech.

I love FinTech. It's my favorite area across the startup spectrum right now. So I operate in FinTech underneath my company called sweater. Sweater's focuses to open up the venture capital asset class to the general public, to retail [00:09:00] investors. If you're not familiar, If you want to put money into a VC fund, you pretty much have to be able to write a half a million dollar check to get into a decent fund.

And most of us just can't do that, right? Even accredited investors, most can't do that. And that's just too big of a chunk of their portfolio to allocate into one asset. most of us are locked out, and we all know where the very best, highest potential deals are at they're backed by VC funds.

And while I love equity, crowdfunding and all that kind of stuff, It's limited in that regard, in terms of the quality of deal flow and the potential of the companies. I look at [00:09:30] this everyone should be able to be in this. It is more risky. There's there's an inherent higher risk than in other areas that you could place your money, but we're smart enough.

There's enough access to information today that it should be possible. So that's what we're working on. at the end of the day, we're going to be going to market as a mobile first approach, much like Robin hood. But instead of putting money in and making trades in the public markets, you're going to be putting money into a VC fund and we'll be tracking back all the investments that we're making across the board, reporting those back to you making you feel like you're really part of the game.

The example that we like to give [00:10:00] is, it's, as if everyone right now is at home watching the NBA on TV and our proposition is we're gonna take you to the stadium, give you court side seats and say, you're a part owner in this team you're watching right now. And that's the experience that we want to give the investors that put their money into sweaters, VC fund.

So in a nutshell, that's what we're working on. We're really excited about the future. Just got some big confirmations from the sec and things are moving really fast for us right now.

Tedd Huff: [00:10:22] I was just gonna say, hopefully my, introduction to this weekend payments didn't scare you too much with all of

Jesse Randall: [00:10:28] Oh, regulators.

Now you just need [00:10:30] to play by the rules. That's all.

Tedd Huff: [00:10:31] So what do you think happened from your perspective and understanding of the capital raise side of the house do you think. This is going to impact visa getting sued by the justice department.

Jesse Randall: Oh, there's so many implications coming out of this. So if you stand in, there's a few seats you could sit in here, right? let's sit in the venture capitalist seat for a minute. All the VCs that have backed plat to date. Really when you're the VC and you're looking at a high growth company, there's.

Really only two options for [00:11:00] you getting your money out of it. Cause at the end of the day that it is their fiduciary responsibility. To maximize the value of every company they put money into on behalf of the limited partners, that are putting money in their VC fund, that makes the whole thing possible.

 when they look at a deal like plaid, they're saying, okay, we know we're going to have to get our money out of this. We want to pick founders are going to do great work that can operate on their own. We don't have to babysit. They're going to go change the world. And by changing the world, they're also going to create monetary value that we'll be able to harvest one day.

And the only way that's really possible at least has been [00:11:30] until more recently is. Being acquired or going public there's this whole SPAC option, which is interesting. And wonder if it's just going to be a flame in the night or if it's really going be something that, to carry forward.

But today, right? It's get acquired or it's going through an IPO and the inherent challenge with becoming as big as Platt is And being acquired for $5 billion is that your number of suitors is very small.  You get up over a billion dollar valuation and there just aren't that many companies that can swallow that kind of transaction.

you're automatically [00:12:00] playing in this smaller field. think that, When you're the VC, it's exciting that on paper, you've grown a company to such a huge valuation because that single investment could make your entire fund 10 times over.

However, if you can't get out of your investment, then you're screwed. And that's been the question on the table for every unicorn for the last, three or four years is this is great. There's so many unicorns and everyone looks around and says, Wait a minute. How many acquisitions have happened over a billion dollars in the last decade?

It's [00:12:30] not as many as there are unicorns around here. So what are we going to do? And having the regulators come in and spit in the face of this deal. Is very nerve wracking it's going to look at every other major acquisition that could happen, not just in FinTech, but in any other industry and say, are regulators going to be upset that we're creating monopolistic or, oligopoly kind of presence in the market by making these sorts of acquisitions happen?

And everybody's already mad at the likes of Facebook [00:13:00] and everybody else that already in Amazon, that have these huge presence in the market. And I think that regulators are really going to look with a lot more scrutiny at these huge acquisitions, which causes a problem for the whole venture and unicorn ecosystem.

So there are deeply implications and I think that's just scratching the surface we could dive in and all kinds of areas.

that's a really good to hear that perspective because it's a lot harder to get in and understand where they're going go. [00:13:30] now you're looking at that whole acquisition side of the house, not, being possible. 

when you start to get that size, you almost stuck in a position of IPO. And really how many of these guys are really ready to IPO. Is that the right step them?

that whole side is so interesting, like 20, 20 was this crazy great year for unicorn IPOs which is insane.

I can't remember the stat. There's more IPOs in 2020, and there have been previous three years combined or five years or whatever. So it's interesting to watch that but at the same time, the IPO is not going to be a [00:14:00] magic bullet for everybody because you're, the company has to be in a state of preparation in order to survive the public market process.

the companies that have IPO have taken their sweet time to get their books in order. So that they're in position of whether it's profitable or not, they're in a much better overall position than most. Companies that have accelerated into that unicorn status because the process to get to unicorn status is typically, over hire, invest in growth completely.

And so your unit [00:14:30] economics are off in order to drive the growth fast enough to get to that valuation level. then in order for it to become profitable. You gotta make some nasty changes. either got to stop the growth machine and let the company catch up to where you're at, or you have to cut the fat in order to get books to work.

the companies that have made it have been in a pretty good position, I'd say that the most primed. Unicorns have now gone public, but the rest, they're all playing the same game. And certainly not, all of them are ready for the [00:15:00] public market, which is the other side of the problem.

So are, do companies have to get to this point and become unicorns and then be able to transition their books and their strategy and their unit economics so that they will be. Quote unquote worthy and prepared for public markets. Can they do that? Or do they need to go back and figure out how to play this acquisition game?

It's a tough equation. No doubt.

So before we close out this relatively short episode today, for those that are [00:15:30] in FinTech and are looking for investment and what types of things do you have or them to really think about so get stuck in the catch 22

Jesse Randall: [00:15:40] At the end of the day, playing the venture game is just that it's a game. 

There are rules to the game. There are ways that you win the game in so many words, right? in many ways, winning the game is becoming a unicorn.

There's a lot of validating points about getting to that opportunity level. But there are downsides to that too, You can't force your way into that status, right? becoming a [00:16:00] unicorn is more of an opportunity than it is a determination. 

You can't just put your head down and say, I'm going to be a unicorn and wish that upon yourself because there's so many other factors at play. that you can't control. But if you're in this controllable position and you're running a FinTech company and you're trying to get this thing off the ground, maybe you've gotten some funding and you have good momentum and whatever, just play your cards wisely.

 It's really like playing poker. You have the hand that you're dealt and then you just have to play your cards in the right way And make sure you're surrounding yourself with people who have played the game before, so that when you have cards in your hand, you [00:16:30] know what they mean, and that you play in the best way you can with what is in your hand.

 Any way you go,...