Fintech 🧠 Food - Coinbase Listing, Moneylion adds crypto, embedded fintech and why Doge making it to the moon matters

Hey everyone 👋, thanks so much for coming back for more Brainfood where I take the biggest events of the week and try to get under the skin of what’s really going on. If you’re reading this and haven’t signed up, join the 5,377 others by clicking below, and to the regular readers, thank you 🙏

Weekly rant 📣

Dogecoin may be a joke, but crypto and defi aren't.

It is tempting to look at the meteoric rise of Dogecoin, the cryptoasset created as a joke, and view the crypto world as a speculative bubble without meaning.  

If you've missed what happened with Dogecoin, Meltem gives an astonishingly concise summary in this Twitter thread.

• Elon tweeted about Doge.

• r/WSB moderators allowed three cryptoassets to be discussed before banning crypto discussion a day later (Bitcoin, Eth, and Doge).

• Redditors hate to be told what they can and cannot buy.

• As Meltem says, "the power of memes is moving markets."

The reality of Dogecoin is much more complex than just speculation.

• Doge is a joke that gets funnier the higher the price gets.  

• Doge is Main St playing Wall St's game and winning.  

• Doge is a middle finger from the crypto-rich and retail market to Wall St and the elites.  

Memes are moving markets because retail is moving markets.

Retail is moving markets because they have more access and because they're pissed off. What happens when 50% of retail net worth is in crypto? There's a massive risk they get burned, yes.  We need to stay mindful of that.

But the trust in institutions is at an all-time low.

Doge is part of the same trend that pumped Gamestop and other meme stocks earlier in the year. It comes from the same sense of unfairness, frustration, and anger at the world's institutions and elite that continues to print money and bails out the banks.

Every time the Financial Times rolls its eyes at Doge, or meme stocks or wallstreetbets it adds fuel to that fire. The financial elites sneer that "greater fool theory" is playing out (i.e., "some dumb sucker will buy Doge after me, and I'll make a load of money"). And look, they've got a point when big money is on the line; regular people can get hurt.  But it's the sheer arrogance that typifies an attitude where the world's elite misses what's going on.

There's a new world of finance that is starting to build outside the old rails. This new world brings all of its problems, risks, and opportunities. Defi and crypto may yet crash, and Wall St may even say, "we told you so," but when you zoom out, today's experiments are tomorrow's Coinbase.

Look past the memes

Centralized structures like governments and regulators were solutions to governance problems we encountered in the industrial age.

In the digital age, finance wants to be global, real-time, and digital. When you work back from first principles, money is becoming digital; governance is becoming digital; power is becoming digital. It will be messy, but the talent and entrepreneurs are building.

Talent is flocking from traditional finance (TradFi) to decentralized finance (DeFi), VC and crypto-rich investors are pumping capital into DeFi, and real consumer-friendly services are starting to emerge.

If your first reaction is to scoff at crypto or DeFi, maybe it's time for a bayesian update.

4 Fintech Companies 💸

1. Rho - Scaleup and Corporate Neobank

• Rho offers Wire, ACH, and same-day ACH for free, card transactions for free but an FX fee of 0.5%. Rho also offers cashback, tools for finance teams, and support from bankers.  Rho is competing for the level up in company scale from Brex and Ramp, where a company needs to manage costs and operations across multiple departments and countries. 

• Rho is a straight play for what banks would call cash management or global transaction banking (GTB).  If you thought SMB banking was big, wait until you see GTB.  Often seen as the workhorse of banking, GTB quietly generates revenues of more than $1trn per year, according to Mckinsey. Expect to see more like Rho.

2. Bumper - BNPL for car repairs (UK)

• Bumper partners with more than 3,000 independent car garages to offer BNPL and splitting for up to £3,000 ($4,100).  Bumper is the 8th fastest growing fintech company in Europe and recently re-branded from "Auto service finance" (good move, guys). Car owners consistently delay servicing and repair work due to high costs.  

• BNPL isn't just for Peletons: Digital BNPL for the analog world everyday costs is a niche segment that seems like it has room to grow.  I haven't seen this much outside of the UK, but it's a pattern to watch. Imagine this with the US market size?  

3. Pancake Bunny (Mound) - Defi yield aggregation and optimization

• By connecting a wallet to Pancake Bunny, can increase the returns on their crypto. Pancake Bunny has created "yield optimization strategies" (for example staking tokens, or locking pairs of tokens in a liquidity pool for others to lend against).  By combining these actions in increasingly sophisticated ways, Pancake Bunny has made complex strategies available to the broader market with a single click.

• Pancake Bunny runs on the Binance Smart Chain (BNB), arguably a competitor to Ethereum because of the high price of gas in Eth today.  Every Eth transaction can cost anywhere between $10 and $100 (depending on your timing/luck). BNB has almost zero gas fees but is also much more centralized and subject to the control of its parent (Binance).

4. Appzone - FIS for Africa (by Africans)

• Appzone has a suite of tools, including core banking, card processing, lending engines, a payments platform, and more.  Appzone has more than 18 bank clients and 4,500 micro-finance banks.

• Companies like Temenos, FIS, and Fidelity have become conglomerates that offer similar services in Europe, North America, and APAC.  If you look at the current market cap of those companies, it's clear Appzone has an enormous TAM.  But I wonder if the most significant opportunity will come from their smallest clients scaling.

Things to know 👀

Bit of a crypto flavor this week 

1. The Coinbase Listing

• Coinbase listed on Nasdaq after staggering Q1 numbers ($1.8bn revenue, $1.1bn EBITDA). After opening close to $410 a share in recent days, the price has slide closer to $320, valuing the company at $64.2bn. Ark Invest, the famed tech investment fund, is reported to have also invested more than $250m in Coinbase stock.

• 🤔 My Analysis: Genies don't go quietly back into bottles. There is no question this is crypto's mainstream moment. There's also little doubt in my mind, crypto will inevitably crash at some point, and every boomer will tell you they told you so.

• 🤔 My Analysis: Coinbase's biggest threat is not a tech bubble crash, but rather, up and comers like FTX, Binance, and Uniswap.  Maybe that's the Coinbase moat; they're the legitimate on-ramp into crypto. Given how buttoned-up they are with regulations and policy, it is impressive how much they've achieved taking the regulators with them.

• 🤔 My Analysis: Famous investor Gary Tan has received coverage for turning a $300k seed investment into $680m at listing. My napkin math suggests if he invested the same amount into Bitcoin in April 2013, it would be worth $1.3bn.

• 🤔 My Analysis: The things that follow Coinbase public will be even more compelling.  The major B2B providers like Paxos, Gemini, or NYDIG could be next. Then in a few years, what about the Defi wallets like Blockfi? Also, do companies like Uniswap ever go public? If not, how do they pay back the VCs? Does the community repurchase the company?

2. Moneylion to add Crypto investment (via Zerohash)

• Moneylion has announced it will allow its customers to buy, sell and earn cryptoassets in partnership with Zerohash. Moneylion has also invested in Zerohash, a leading provider of cryptoasset settlements.  In a survey of 2,000 Moneylion users, 60% had crypto, and of those not in the market, 77% intend to be in the next year.

• Users can earn crypto through a standard cashback rewards program or round up debit cards to the nearest dollar and receive equivalent value in crypto.

• 🤔 My Analysis: Crypto is the ultimate engagement and marketing tool.  It has been incredibly effective for Robinhood and Square, where users come for the crypto, stay for the fintech.

• 🤔 My Analysis: Every tier 1, Neobank, and brokerage is now trying to figure out how to get crypto to their customers. Zerohash is selling shovels in a gold rush. Neobanks in Europe especially have an imperative to show profitability, and Revolut has driven theirs primarily through trading and crypto.

• 🤔 My Analysis: Crypto as a rewards point alternative makes a ton of sense on the surface. It has worked incredibly well for Fold.app, Cash App and Blockfi to drive engagement.  Instead of points they might never use, the customer gets a coin that may increase value in the future. Would you rather have USD, which will reduce in value, or crypto, which could increase in value?

Good Reads 📚

1. Embedded Fintech vs. Embedded Finance

• If you're a smaller bank, then embedded finance makes sense; if you're a large bank, embedded finance can make sense via partnerships. For mid-sized banks, that is harder to reach.  

• Mid-sized banks should use services created by fintech companies in their products, apps, and websites. Services like bill negotiation, subscription management, identity protection, and crypto investing increase engagement and revenue potential for banks. For Gen Z and Millenials, 88% use the app as their primary channel. For these consumers, the app is the product. The capitalize on this opportunity, banks need an embedded fintech factory.

• 🤔 My Analysis: Banks as the consumer of fintech products is an untold and potentially massive story. Fintech, the consumer of other B2B fintech providers, is also not often discussed but a significant area for exploration. The fintech stack doesn't have to be exclusive to fintech companies.

• 🤔 My Analysis: Building an "embedded fintech factory" is a great idea but can't be done in isolation. It would be like Kodak building a digital camera factory; it doesn't solve the real problem, which is culture, business model, and operating model.  

2. Latam fintech boom

• a16z breaks down why LatAm is such a compelling fintech market. Brazil and Mexico respectively have populations of 210m and 120m.  LatAm's incumbent banks only catered to affluent people, leaving between 30 to 50% unbanked.  The services the banks did offer were often inadequate. 90% of Brazil and 70% of payments in Mexico are still with paper money, and LatAm banks are some of the most profitable in the world with incredibly high-interest rates.

• Macro shifts in Latam include a large population of young people, high mobile penetration, increasingly friendly fintech regulation, pandemic-driven mobile adoption, and real-time payment infrastructure. Opportunities exist for full Neobanks (e.g., More Nubank types), B2B infrastructure players (e.g., KYC, credit scoring, data aggregation). Opportunities also exist in SMB services and real estate.

• 🤔 My Analysis: a16z's macro summary is spot on, as you'd expect, but the last point is the kicker.  It's not as simple as taking an idea that worked in the US and doing it in LatAm; the focus on local regulations and nuance is vital.

• 🤔 My Analysis: Not covered (but likely considered) is that open banking is still very early in LatAm. While there are countless "Plaid for LatAm" players, it is critical to execute and scale.  Europe has open banking, but the lack of a dominant player means the "login with Plaid for easier KYC" experience that fintechs use to bootstrap adoption isn't as common here.  That hasn't stopped folks like Nubank in LatAm, but imagine what would be possible if Latam did have that scale player.

Tweets of the week 🕊

That’s all folks 👋