Case of Decentralized Exchanges – DeFi<
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DEDICATION
To the world-class investors who have been with me right from the beginning
of my 11 years of independent research: Eric Bushell, Adam Levinson, Amit Rajpal,
David Courtney, Rob Citrone, Tomonori Tani, Todd Tibbetts, Scott Sleyster, and
Gary Ang. Thank you for letting me stand on your tall shoulders.
Paul Schulte
To my father.
William Dogger
CONTENTS
ACKNOWLEDGMENTS v
Foreword vi
Introduction xi
Chapter 1: NFTs and crypto 1
Chapter 2: Fintech and Blockchain 43
Chapter 3: Insurtech and blockchain 95
Chapter 4: Proptech and Blockchain 131
Chapter 5: Case study – The fight for Southeast Asia: Sea, Grab, and Payoneer 152
Index of companies 158
ABOUT THE AUTHORS 160
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ACKNOWLEDGMENTS
Many people helped me to drag this book over the finish line. One person
helped me with profound insights on a higher plane, and that is David Lee. Another
is Taiyang Zhang, a unique world-class thinker on crypto issues and the evolving
world of digitization. Adam Levinson is another superb thinker on these issues who
always sees around the corners. Those who offered support, friendship, and sanity
checks along the way were John Fowler, Brian Ganson, JY Phuang, Roman Shemakov, Gary Ang, Dillon Hunter, Jim Stent, Matt Zayco, David Sheldon, David
Halperin, Peter Early, Rob Jesudason, and Austin Groves. Also, great thanks to my
co-author William Dogger, one of the best hires I have made in 10 years! Special
thanks to Marcus Frontera for his great work.
Paul Schulte
For the continuous support by my family in France, Norway, and Iran. For the
friends I have made along the way in Nice, Paris, Milan, London, and Toronto:
Angie, Clément, Jonathan, Benjamin, Vincent, Loubna, Mona, Matthias I., Marcus,
Stefanos, Matthias H., Manó, Giorgos, Isis, Clémence, Rayan, and many others. For
my colleagues JY, Tom, and Dean. Paul, for the trust you placed in me.
Thank you.
William Dogger
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FOREWORD
When Amazon bought Whole Foods in 2017, many were scratching their heads. Why
would an offline entity buy a physical property? As it turns out, this was ingenious as
this revolutionized the O2O business model that is ubiquitous. In this same way, the
digital world steeped in crypto and gaming has moved into the physical market of currency, art, wine, entertainment, and even securities to create a new “offline to online”
market leveraging blockchain — let us call it O2B or offline to tokenized blockchain.
The nexus of this is the non-fungible token, or NFT. This is simply a unit of data of a
unique digital object stored on a digital ledger or blockchain, which can then be saved
or traded. In this way, it stands as a unit of exchange and as a store of value.
An example of this is Axie Infinity, developed by Sky Mavis and uses Ethereum. Its
NFT collection is valued at $42 mn. Another example of this is Sygnum, which boasts
NFTs ranging from wine to Picasso’s. The digital world is increasingly bringing the
physical world into its universe via blockchain, and this extends to cards, collectibles,
art, gaming, currency, content, and carbon credits, among many others. As more and
more younger people live in this digitized world for almost all their needs (and with
increasing wealth!), these millennials are creating a metaverse of blockchain-based tokens, which are likely to explode in value. This world promises to be a more inclusive,
more innovative, and more creative than a physical world from which many of these
younger people feel they have been excluded.
This metaverse is parallel to the physical world — a world of avatars, virtual substitutes, and XR designed to interact in what we will call an ABCD fashion. This
form of artificial intelligence (let us call it A), when joined to the blockchain (let us
call this B), could add around 16% to global output, or about $13 trillion. Indeed,
it is clear that both AI and blockchain are immature technologies and are subject to
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glitches. Nevertheless, this is true of all technologies. AI can overcome many types of
human biases that bring about bad outcomes. Blockchain offers a way to create trust
through an immutable transaction with no need for an intermediary that takes a big
cut, often initiates new inefficiencies, and usually involves cartelized franchises. The
governance function of the blockchain I describe is a self-sustaining mechanism to allow for maximum improvement and inclusion for all participants. By buying an NFT
on a blockchain, you own an immutable digital space in the binary trustless virtual
world sustained and protected by the consensus of the decentralized nodes. One of
the most important aspects of a blockchain-based metaverse instead of a centralized
cloud-based network is that ownership on a cloud can disappear with it or be changed
by the centralized authority.
This leads us to the C of ABCD: cryptocurrencies. In the metaverse, crypto is the
foundation of “DeFi”, the D of ABCD. This new form of blockchain-based finance
has evolved for many reasons: impatience with unfair structures, profit-seeking entrenched oligopolies, irresponsible monetary policy, among others.
Crypto is the currency of choice to interact within the metaverse. It relies on
smart contracts, mainly through Ethereum. It bypasses the traditional structure of the
use of paper currency as issued by central banks. (Please refer to my recent book Financial Management in the Digital Economy for more details). This world of crypto
is how almost all non-fungible tokens are traded. The value of these NFTs surged to a
new high of $2.5 bn in the first half of 2021. Christie’s has sold $70 mn of NFT art.
Sotheby’s has also entered the fray. Even Visa has entered the scene, buying a “Cryptopunk” avatar for $150,000.
The D of ABCD is where Paul Schulte’s book, which you are about to explore,
becomes essential. DeFi is seen as integrating AI, blockchain, and crypto with a
digitized metaverse to save, trade, transact, and manage wealth. It does not rely on
centralized financial institutions such as commercial banks, clearing banks, or central banks. It does not rely on traditional securities exchanges or other entities ——
like SWIFT for banks or DTCC for brokers. China has taken a decisive lead here,
with other countries such as Singapore, Thailand, HK, and the UAE in advanced
stages of rollout.
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Here is the rub. This is clearly a threat to most traditional commercial and investment banking structures, although Goldman Sachs and JP Morgan have done
remarkable work in advancing their blockchain systems. However, is it a threat to the
fintech firms that have only recently created a new generation of financial services
which are purely digital but lack blockchain applications? This book explores who in
the fintech space is capable of and ready for more change and upgrades in their relatively new systems.
Among those companies that have a real chance to (yet again) leapfrog into the
world of DeFi, we put our money on Visa and Master Card. Square and PayPal are
also doing quite advanced work in this area. The book nicely covers this. Facebook,
Google, and Apple are threatening to move into this area aggressively, but they are
very low-key in articulating their strategies. The book also covers Coinbase and what
they are up to. The book also addresses some of the more helpful valuation parameters
that can value these companies. On the unlisted side, companies like Circle are in the
middle of the traffic and are essential to understand.
The other part of this book analyses whether the new crop of insurtech will be
capable of making the leap to the blockchain metaverse. So far, Schulte’s conclusions
are somewhat dire. Few if any of them have mastered a purely digital model that offers even a hope of profitability. As they bleed losses trying to master a strictly digital
approach to insurance, can they also pour money into complex new metaverse DeFi
functionalities that require complex blockchain systems? He is skeptical. This is probably because insurtech got off the ground in 2017-18, much later than fintech, in
2013-2014. If the evolution of fintech is anything to go by, insurtech will likely begin
to move into the metaverse in 2022-2023. However, the speed of the pure metaverse
companies like Coinbase, Envelop, Sygnum, or Silvergate could leapfrog them and
move into the insurance space. The blockchain-based world of insurance is open field
running, and there are virtually no players. Surely, this is a place to dig.
Lastly, the book explores two other vital areas. One is the world of proptech.
Schulte and his team have picked Linklogis in China and Bukalapak in Indonesia
as two companies redefining logistics. Linklogis has done more than any other company globally to link blockchain into working capital for small and medium-sized
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enterprises. Their business model is fascinating and represents the best of DeFi — creating a working capital metaverse for entire systems. Bukalapak is looking for a new
way to fund small shops across Indonesia’s archipelago. The best of all worlds would
be Bukalapak’s “distribution and logistics” system and Linklogis blockchain “working
capital and logistics: system.
The last part of the book is essential from the viewpoint of Singapore. SE Asia is a
global hotspot for new finance applications to hundreds of millions of unbanked and
generally unresponsive banks. Grab, Payoneer and SEA are the major players here. As
these morph into digitized payments platforms and then stretch into the metaverse,
his money is on SEA. After all, the world of gaming is the best teacher for the DeFi
metaverse. Grab’s losses grow by the year, and Payoneer operates in dozens of regulated jurisdictions. This will be a battle royale to watch.
Lastly, there is extensive coverage on Chinese Big Tech companies. They are continuously improving AI, data, machine learning capabilities and rolling out blockchain-based services to stay on top of the market, improve margins, and ultimately
reach an interoperable infrastructure. This is fundamental to communicate and share
data on a new set of digital rails: seamless, immutable, secure, and scalable. The “laissez-faire” attitude in the last 20 years in China led to the rise of massive conglomerates
with valuable proprietary databases and the emergence of systemic risk from a narrow
pool of companies.
Recently, these companies confronted political risk underpinning the Chinese
government crackdown. Alibaba, Tencent, and Ping An are technologically and operationally way ahead. However, they are fighting fierce headwinds from aggressive
regulators. The latter are bent on curbing China’s Big Tech and redefining the Chinese
regulatory landscape: greater state control on data, monopolistic activity, payment
channels, and consumer lending habits.
I strongly encourage readers to look into this book. Paul Schulte and his colleague
William Dogger dissect each company in fine detail and then circle back, offering a
strategic view of where things are going sector by sector. Finally, they package everything up in the front of the book with important themes for professors, investors,
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olicymakers, and central bankers to gauge success or failure on a corporate or nap
tional level. It has extensive text at the beginning of each section to offer insight and
context but is also well articulated in PowerPoint for too many of us lost in the Twitterverse. All in all, it is the right book at the right time and in a cutting-edge area of
finance. The metaverse will only grow. There is no way regulators can put this genie
back in the bottle. They must evolve with it and, at best, tame it. Trying to get rid of
it will only broaden it.
David Lee, Ph.D.
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INTRODUCTION
This book is a kind of illustrated look at the evolution of finance and insurance as well as property – from the now musty world of digital apps to a very recent shift
into blockchain-based functions. The latter can shape both the quantity and the quality of digital information of people, places, things, and ideas. It is happening at great
speed, as all new technologies can and must. It is happening to several different,
although related, industries simultaneously but in slightly different ways. This book
is very detailed and case-specific about exactly how these changes are happening and
how they will affect the lives of consumers, bankers, investors, and regulators.
The picture below lays out the theme of this book. Fintech, proptech, and insurtech
are now in an intermediate stage of development. They have done what they can for
customer acquisition, AI, edge computing, elaborate credit scoring, telematics, IoT,
cloud, and display. New digital sub-sectors have been created in payments, eCommerce,
wealth management, lending, buyer/seller platforms, smart homes, cities, and end-toend all-digital insurance products. Much of this has been done autonomously from
traditional platforms. In this way, a new industry born twelve years ago, starting with
pioneers such as Alibaba, PayPal, and Square, has now reached a stage of maturity.
Figure 1
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In 2020 and 2021, we have seen this technology move to a whole new level with
the acceptance and integration of blockchain technologies. They are causing a profound fracture in traditional financial services because they can create open- and
closed-chains for all kinds of services as noted above — property, finance, insurance,
broker/dealer activity. At best, all of this can be done without the traditional systems
for banking such as SWIFT, DTCC for securities, or expensive mortgage brokers
for property. At worst, they can exist alongside and offer a fringe group of “financial
anarchists” an opportunity to operate outside a system they have grown to distrust.
We submit that the acceptance and integration of blockchain technologies in finance,
insurance, and property would not have been workable without the increasing acceptance of cryptocurrencies. In many ways, the themes we lay out in this book clarify that
the growing popularity of crypto and the ever-increasing use cases of blockchain are a
“hand in glove” affair. They go together. The chart below shows a new set of tools that
have grown out of blockchain and crypto activity. These include financial services, healthcare, clinical trials for drugs, government and civic action, transportation, and insurance.
We think that the greatest need for blockchain applications lies in insurance. The
spate of newly listed insurtech companies have impressive technologies, but they have
no blockchain applications almost to a man. This is remarkable since insurtech evolved
long after fintech, a recent phenomenon dating back to 2017. There is a gaping hole
in the insurtech landscape for blockchain/crypto projects. Blockchain applications in
property are only now bearing fruit in 2021.
So, the companies we highlight have little blockchain technology but are candidates for “bolt-on” crypto activity.
Centralized blockchain infrastructure
Focus on Government services, Healthcare, and Transport
Banking and Financial
services
Healthcare
Schulte Research
Research & Clinical
trials
Faster and more secure payments, settlements, and clearance
Securely share data across Healthcare institutions
Reconcile disparate data
Increase efficiency, minimize fraud, and increase accountability
Government & public
records
Casting, tracking, and counting votes
Public transportation
Commuting and transit data to improve transportation systems
Claims management
Improve back-end healthcare and insurance infrastructures
Sources: Schulte Research
5
Figure 2
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As 2021 draws to a close, we think a new phenomenon will become standard
over the next two to three years: NFTs — non-fungible tokens. The manifestations of NFTs we see today are talked about as hype, glamorous, over the top,
activity for those with cash to burn. We think this is a mistake to believe that
this is a flash in the pan. We will show in this book the natural use of blockchain
to extend the maturity and uses of digital fintech products. In the same way, we
believe the use of NFTs is a natural extension of blockchain and crypto. Indeed,
a strong case can be made that NFTs can only arise out of a world encased inside
blockchain and crypto.
The page below shows how NFTs can extend the uses of blockchain and create yet
again a new set of industries that we have never seen. Blockchain’s indelible creation of
universally recognized ownership and identity — as well as fungible smart contracts —
solves many problems of ownership and financial rights for amateur digital art, film
characters, unique avatars, and talented gamers. It solves many issues of minimal royalties for products bought by millions of people. It can play a role in public and civic
activity. It creates whole new digital worlds in gaming and education. And it creates a
store of value that can be in the gate of hundreds of billions.
Initial applications of NFTs
Applications of NFTs are broad and growing
Entertainment
Collecting
Creation
Governance
Schulte Research
Gambling
Investing
Gaming
Own sporting moments, film characters, or amateur memes
Store assets safely, relying on underlying wallet
Unique ownership of an item, with continual proof of authenticity
Anyone can share their talent publicly and own it indefinitely
Claim royalties on future sales, guaranteed by smart contracts
Voting functions (i.e., choosing next signing for sport team)
Could develop to decentralization of political and corporate decisions
Offers a new item to wager
the digital file itself
Zed Run has sold tens of thousands of virtual horses that can be bred and raced for money up to US$65 k
Uniqueness of assets leads to appreciation in price as popularity grows
Both in gambling format and with a more recreational focus
In-game items are tokenised, to be exchanged outside of the game
Sources: Schulte Research
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Figure 3
We will also unabashedly explore the political ramifications of this massive shift
in technology. Control of cities along the Silk Road is an essential part of this. We
must examine the US-China conflict to see who will control the new digital railroad
systems these blockchain products will travel. The regulatory issues are paramount
since regulators have sovereign financial autonomy problems to consider. They need
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to raise debt shortly and use old copper-based systems to pump out this debt to old
buyers. New technologies could very well compromise this ability. Exchanges are primarily a private sector affair and are naturally jealous of new entrants that can disrupt
profitable businesses.
Furthermore, when it comes to insurtech and the oncoming freight train of blockchain technology and tokenization, these fairly new creatures with novel solutions
to insurance will need yet another investment cycle reasonably soon. It is not good
enough to say that the technology is three years old, so it is sufficient. Technology is
changing rapidly. Fintech companies like Visa and PayPal have invested in crypto and
blockchain since four or five years ago, so they are ahead.
Insurtech will need costly programs to create newer technological solutions for
2022 dilemmas. This will involve investing in parallel blockchain solutions, which
are expensive. Bolting on blockchain solutions to existing “older” technology is not a
sufficient solution. This will be expensive. And it will require new forms of interoperability. For us, it makes sense to think of insurance products as a universal insurance
offering. The new blockchain technologies speak to a unified platform that can be
spun off later after interoperability is established.
Lastly, we add an insurtech case study that shows the kind of insurance super
app we would want if we had a magic wand. It envisions an easy-to-use interface
that is interoperable and universal in its offerings of insurance products. Specialized
insurance runs against the grain of the ubiquity that is offered by multiple layers of
data. This app lays out the app features which combine the best of health tech and
insurtech with blockchain in the background. Again, these new technologies beg the
use of universal ubiquity and not niche specialization. Platform ubiquity will lead to
specialization. Gathering specialist niche platforms in the hopes of creating one integrated system may be a fool’s errand with blockchain.
The movement from fintech and insurtech based on AI and IoT to blockchain-based NFTs is to us as natural as the move from whale oil to electricity. It is as
easy to grasp as the move from the horse to the car. It is as simple to comprehend as
the move from the telegraph to the telephone. It is unstoppable. It will be accepted
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and regulated. It will provide vital solutions to governments. It will bury those who
refuse to adopt it.
Enjoy this book. We are exploring new trends as they develop – technical, political, geographical, and civilizational. With tokenization achieved through cryptocurrencies, the move from physical to pure digital on all fronts will have massive implications for existing financial, political, and economic infrastructure. Figure 4 to Figure
8 below explain what drives home the front. The economic and financial essence of
tokenization cannot be understood without connecting them to the political and diplomatic shifts appearing before our eyes. May the best man win!
Welcome to the money metaverse.
Key issues in Blockchain infrastructure:
How the public-private intersection will work
Monopoly, data privacy, regulations, systemic risk, proprietary/public infrastructure?
Will the development of Blockchain-based infrastructure be led by privately-owned entities,
governments, or collaboratively?
Schulte Research
VS.?
With?
Sources: Schulte Research
8
Figure 4
Key issues in Blockchain infrastructure:
How the public-private intersection will work
Monopoly, data privacy, regulations, systemic risk, proprietary/public infrastructure?
Private infrastructure
Public infrastructure
Threat of monopoly behavior can lead to antitrust
investigations, hindering advancements
Government controls data
Fragmented market leads to inefficiencies in the
treatment and usage of Big Data due to unconsolidated
data
and absence of trust in the government
Schulte Research
Lack of incentives in developing proprietary technology
due to systemic risk posed by data monopoly
Fragmented government entities in the US slowing down
Centralized control in China lead to faster advancements
harmonization of internal and external data
Trust and accountability of private companies
Sources: Schult
Schulte Research
9
Figure 5
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Key issues in Blockchain infrastructure:
How the public-private intersection will work
Monopoly, data privacy, regulations, systemic risk, proprietary/public infrastructure?
Schulte Research
Our take
Data in China will be owned by the PBOC?
Data in the US does not have consolidated
control. Fragmented data in FB, APPL, AMZN,
GOOG plus investments by government in
privately-owned companies
Blockchain and DC/EP powered by the BSN?
Blockchain in the US now heavily funded by the
Department of Defense
Data are the cars on the railroads, Blockchain is the railroad
Railroad monopoly controls how much it charges, when, how, who, and at what frequency its usage
Sources: Schulte Research
10
Figure 6
Global Summary:
Deviation between sectors
Deviation between sectors on valuation & operating metrics, but all adopting similar business models
Fintech and Crypto companies trading at far higher multiples relative to Proptech and Insurtech
Valuation
Early listings resulting from a plentiful supply of capital that is spurring record valuations and company growth
Fintech giant Visa spearheads trading multiple rankings
Fintech companies are seeking a path to profitability;
They need headway to reach scale and market;
Operating metrics
Fintech is an industry characterised by high technological barriers;
Meanwhile, Insurtech is struggling to reach profitability;
Select Insurtech companies are still achieving loss ratios comparable to traditional insurers due to poor proprietary technology
Schulte Research
Fintech, Insurtech, Crypto, and Proptech
Business Models
A one-stop-shop super app seems to be the weapon of choice to achieve CEN, supporting cross-selling/up-selling benefits. This remains elusive
Ping An has achieved this by leveraging an O2O strategy to offer a variety of services in a single app
PayPal is on this bandwagon by recently announcing the creation of its own one-stop super app
Sources: Schulte Research
11
Figure 7
Global Summary:
Similarities between US & China
US & China both focused on antitrust & data, whilst shared goals between sectors are driving trend commonalities
Key goals focused on solving pain points at both ends of the value chain
Goals and Limitations
Ultimately look to achieve harmonised decentralized platforms, remove intermediaries and improve efficiency
Limitations are related to poor transparency, uncertain regulatory landscape, fraud, fragmented markets, etc.
Blockchain a key railroad for all sectors
Record funding
Trends
it is a transportation system for all data
Q1 and Q2 2021 have seen a flurry of capital fuelling growth
IoT, Big Data, AI and analytics becoming a mainstream technology for all sectors across all aspects of their business model
operations and customer experience
fraud,
Schulte Research
Decentralisation and data as a store of value are hot emerging topics
US and China at cross roads on regulation
Regulations
Both are focused on addressing issues related to antitrust, data privacy and data monopoly
Chinese IPOs in the US to redirect to Hong Kong in response to cybersecurity reviews requirements before listing overseas
Sources: Schulte Research
12
Figure 8
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Chapter 1:
NFTs and crypto
Section 1: The world of finance, insurance, property, and health is rapidly morphing into a crypto-led digital metaverse where all physical movement (people, places,
things, and ideas) is being tokenized, valued, and traded. Increasingly, all of this
must be seen as a whole, and financial institutions which fail to see this will be out
of business.
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players
NFT
Intellectual property
Crypto
Fintech
Property
Money
Insurance
Art/Wine/Sports
NFTs
Gaming
Rewards and incentives
China key players
Insurtech
Proptech
Risks
Schulte Research
Monopoly behavior
Antitrust hindering
development
Railroads Required
Blockchain (e.g., BSN)
Central Bank Digital Currency
Incentives to develop
proprietary technology
Fragmented data
Public trust
Sources: Schulte Research
14
Figure 9
There is a new railroad being laid; only it is digital. This railroad is blockchain.
China has the lead so far, but the western alliance is rapidly catching up. Central
bank digital currency will be the main railroad, though it is unsure who will own
it. More importantly, who will operate the railroad station franchises. In China, it
is Alibaba and Tencent now securely under the thumb of the PBOC and the State
Council. In the West, it is still hard to say, but Visa has done a phenomenal job
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of commandeering much of the activity of railroad stations. PayPal is catching up
quickly. JPM and Square are also powerhouses. Coinbase is a significant player but
just cannot get any love from investors.
Digital currency: institutional investors
CBDCs as the first step to democratization of digital currencies
Remarks
Primary role for a crypto in a portfolio or treasury account
The Economist survey of 200 institutional investor and corporate treasury management
Issuance of CBDCs necessary to establish functioning market for new
financial instruments
Capital appreciation, 33%
will increase demand for other forms of
digital currencies
Alternative asset diversification, 31%
Institutions sees a demand for international institutional-only currency
exchange platform
Monetary transfers for large settlements, 29%
Increased regulatory clarity needed
F/X or currency exchange, 28%
Preference for transactional use in the future, but currently used as a store of
value
Hedge against inflation, 28%
Schulte Research
Governments and regulatory entities:
1. must work together to bring clarity and investor protection when
investing in crypto-assets; and
2. must educate and provide guarantees for both investment in
crypto-assets as a store of value and as a medium of exchange
Hedge against low interest rates, 27%
Protection against geopolitical uncertainty, 25%
Simplified digital settlement/transaction only, 24%
Speculation, 21%
Deflation protection, 16%
They should have no role, 1%
Sources: The Economist Intelligence Unit: Digimentality 2021: Digital currency from fear to inflection
20
Figure 10
Figure 10 shows just how rapidly cryptocurrencies have become an integral part
of investing. According to the EIU, only 1% of participants in its survey said crypto
does not belong in a portfolio. The suggested uses include capital appreciation, diversification, transfers, inflation hedge, and a political risk hedge.
Digital currency: institutional investors
Catalysts and obstacles to acceptance of digital currencies
Primary triggers to enhanced activity in digital currencies
Primary obstacles to institutional investor of digital currencies
The Economist survey of 200 institutional investor and corporate treasury management
The Economist survey of 200 institutional investor and corporate treasury management
Wider adoption of CDBCs, 31%
Market trust or understanding of digital currencies/assets, 47%
Availability institutional-only digital currency exchange, 29%
Financial market structures, 43%
More robust AML controls, 25%
Increased economic instability, 25%
Asset volatility, 36%
Sharp rise in other asset prices, 23%
Support digital currencies by leading corporations, 23%
Reduction purchasing power, 21%
Provide regulatory
framework and
institutional investor
protection
Sharp fall in other asset prices, 21%
Internal technological challenges, 32%
Regulations, 32%
Lack of related digital financial services, 27%
New regulatory framework, 21%
Lack of corporate support, 24%
Schulte Research
Rising interest rates, 19%
Continued low negative interest rates, 18%
Insufficient interoperability, 19%
Significant social unrest, 13%
Sources: The Economist Intelligence Unit: Digimentality 2021: Digital currency from fear to inflection
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Figure 11
Figure 11 shows the obstacles to greater use. Frankly, we boil it down to two:
absence of insurance and regulatory approval as a tradable commodity asset class on
the CBOE.
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Stablecoin categories
Growing base of stablecoins displaying a movement beyond traditional crypto use cases
Fiat-backed
Coins backed by a corresponding US$ in a treasury
Crypto collateralized
Stablecoin collateralized by other digital assets (e.g., ETH, BAT, USDC)
Interest-bearing
Token created to represent stablecoin deposit earning interest
Backed by SNX holders who are rewarded for providing collateral and stability
with fees generated by Synth transactions
Schulte Research
Synthetic
Algorithmic
Coin programmed to optimize search of highest yield opportunities
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Figure 12
Crypto lending
Crypto lending booming
a trend picked up by blockchain projects
Obtains crypto loans
Deposits fiat currency
Lender
Borrower
Deposits crypto assets as collateral
DeFi Lending
Platform
Schulte Research
Repays the loans with interest
Receives collateral back after
repayment
Receives funds back with interest
(passive income)
Sources: Medium.com
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Figure 13
NFTs: Crypto Art Boom
NFTs have grown to account for c.10% global art market sales where Millennials account for 71%+ resell art
NFT sales by category
Collectibles
NFTs quarterly sales1
Sports
Games
Art
Utility
Data in US$ m
Me taverses
$2,929.2
5% 3%
11%
40%
10%
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31%
$424.0
$9.2
$7.7
$18.4
$31.6
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
$503.9
Q2 2021
Q3 2021
Sources: Consensys, NonFungible
(1) Q3 2021 until 15-Sep-2021 included
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Figure 14
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Then, we get to the evolution of non-fungible tokens. The first element of this
is the inclusion of DeFi to trade, collateralize, securitize, and perform government
functions (Figure 12, Figure 13, and Figure 14).
The second is to guarantee an immutable, connected, and transparent establishment and public recognition of this thing or this person. Solana is seen as a strong
candidate for this space.
The third element of this is the theme of this report — the metaverse. This includes the public valuing of assets outside of any intermediary. This includes artistic
expressions which live only in the digital domain.
Summary
Schulte Research
Special benefits, opportunities, and use-cases
Authenticity
Validity, uniqueness, and properties
are immortal and decentralized
Connectivity
Immediate access to creators,
buyers, and sellers globally
Smart contracts
Enable price-fixing, royalties, loyalty
rewards, and infinitely many other
functions
Fresh engagement
Incentivise fans and encourage
repeat-purchase of other products
Provide voting rights, with all of the
above benefits
Transparency, yet
anonymity
Assets owned on public keys, visible
and tracked, without direct
identification
Decentralized
governance
Immutability
Once minted, an NFT is immutable
Metaverse immersion
Ownership is validated by the
underlying blockchain
Security
Inclusion
A key step towards a digital,
tokenised world. More
interoperability and sectors must
follow
Involvement of the general public
into any space
Sources: Schulte Research
24
Figure 15
NFTs unique representation of a digital file
Exist on the blockchain: capable of exchange and ownership, with the benefits of immutability, traceability, and security
Accessibility
Schulte Research
Uniqueness NFT
Anyone can purchase (or even create) an NFT
Most popular public marketplaces: OpenSea and Rarible
Unique: can not be interchanged with another
Underlying digital file allocated to single owner on the blockchain
Similar to cryptocurrencies
Controlled by private
cryptographic key
Most users connect to a wallet (i.e., Coinbase) to the marketplace, allowing non-custodial storage
Laws and regulations
The nascency of NFTs limits the associated laws and regulation currently
Minting
Smart contract
Process of converting a file to an NFT
Usage and ownership of an NFT igoverned by smart contracts
25
Figure 16
4
Paul Schulte
Initial applications of NFTs
Applications of NFTs are broad and growing
Entertainment
Own sporting moments, film characters, or amateur memes
Store assets safely, relying on underlying wallet
Collecting
Unique ownership of an item, with continual proof of authenticity
Anyone can share their talent publicly and own it indefinitely
Creation
Claim royalties on future sales, guaranteed by smart contracts
Voting functions (i.e., choosing next signing for sport team)
Governance
Could develop to decentralization of political and corporate decisions
Offers a new item to wager
Schulte Research
Gambling
the digital file itself
Zed Run has sold tens of thousands of virtual horses that can be bred and raced for money up to US$65 k
Investing
Uniqueness of assets leads to appreciation in price as popularity grows
Both in gambling format and with a more recreational focus
Gaming
In-game items are tokenised, to be exchanged outside of the game
Sources: Schulte Research
26
Figure 17
NFTs trends: integrate financial frameworks
Integration into DeFi and Portfolio management
Virtual objects type of cultural capital
Traditional and emerging art expected to be integrated into emerging financial frameworks
Schulte Research
DeFi
Collateral for borrowing or
fractionalized
Portfolio management
Attached to fixed income
instruments
Government participation tokens
Sources: Blockchain Council
27
Figure 18
NFTs trends: metaverse, DAOs, digital museums
Difficult to implement in the fiat universe
Schulte Research
Ethereum
to send and lock NFTs to individual
addresses
Decentralized autonomous
organizations
Applications
Software-defined investment
collectives that bid on the acquisition
of artistic expressions
Sources: Blockchain Council
28
Figure 19
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M O N E Y M E TAV E R S E
NFTs trends to watch: multichain and institutional
protocols & networks
IPFS and multi-chain support to avoid losses of digital assets in case of blockchain discontinuity
IPFS and multi-chain support
Enterprise IP networks and emerging media
Token market collapse in 2018 caused majority of crypto community
to shift focus to institutional enablement models
NFTs allow ownership of a reference to a file stored on IPFS
Led to proprietary protocols and networks
Problem: if business ceases to exist, unclear what happens
to your digital asset
Schulte Research
Resulted in digital asset and consultancy programs aimed
at developing blockchain controlled operations
Expect similar chain of events in traditional media: film, music, and
art
Possible solution: IPFS secures NFTs in the multichain world
Sources: Blockchain Council
29
Figure 20
NFTs provide new opportunities within
entertainment
Secure and reliable revenue stream, providing traceability, engagement, and governance
New revenue stream
Offerings and transactions can continue outside of the sporting-season
Security and traceability of all tickets
Ticketing
Tickets with fixed price on the blockchain, preventing scalping and touting
Fan engagement
Customer relationship
management
Schulte Research
Fans are willing to pay to for inclusion and interaction
Advertisement
Exclusive offers and loyalty rewards tracked and distributed via ownership of NFTs
Data value at the core
Ownership segmentation, quantity, and composition within a wallet offer insights to the customer base. Leveraged for
tracking improvement, advertising, and collaborations
High-profile NFTs draw attention to the underlying entertainment (e.g., NBA Top Shop for the NBA)
Governance
Fans can contribute to decisions: revenue generation and benefit from wisdom of the crowd
Sources: Schulte Research
30
Figure 21
Crypto is the cashflow, NFTs are the assets
Nascent market expanding at a rate that can not be ignored
Transaction volume
Famous NFTs
Schulte Research
Ownership of a file?
Pandemic as a catalyst
c.US$2.5 bn of sales in H1 2021
CryptoPunks have had more than US$1 bn in volume
Beeple
Everydays
the most expensive NFT ever sold for US$69 m
How can it be pictured in this PowerPoint, yet sold for US$69 m?
Comparable to photographing or copying the Mona Lisa: the value is in unique ownership
The pause in entertainment and sport required a new way to engage and monetise fans worldwide
Aligning with the surge in blockchain-based products
31
Figure 22
6
Paul Schulte
The fourth element of this is the enterprise or institutional, which are a betrayal
to the purists in that they are proprietary. This includes central bank coins and aspects
of traditional media like music and film. Figure 15 to Figure 22 are clear pictures
showing the trends in NFTs.
The bottom line for us is that crypto is the cash flow and NFTs are the assets. This
will flow into art and wine but also tickets, fan engagement, advertising, governance,
and member wallets. This market is $2.5 bn and rising sharply by the month.
NFTs: Crypto Art Boom
NFTs have grown to account for c.10% global art market sales where Millennials account for 71%+ resell art
NFT sales by category
Collectibles
NFTs quarterly sales1
Sports
Games
Art
Utility
Data in US$ m
Me taverses
$2,929.2
5% 3%
11%
40%
10%
Schulte Research
31%
$424.0
$9.2
$7.7
$18.4
Q1 2020
Q2 2020
Q3 2020
$31.6
Q4 2020
Q1 2021
$503.9
Q2 2021
Q3 2021
Sources: Consensys, NonFungible
(1) Q3 2021 until 15-Sep-2021 included
19
Figure 23
Key risks associated with NFTs rollout
Volatility
Environmental
Licensing
Schulte Research
Regulatory
NFTs are difficult/impossible to value, due to their unique nature. Combined with rapid and global exchange; prices
change quickly
Ethereum, currently the leading blockchain for NFTs, demands vast amounts of energy for its Proof-of-Work structure
Ethereum switching to Proof-of-Stake consensus mechanism
Owners-rights are dependent on the marketplace and NFT, these should be reviewed prior to purchase
Newer projects are offering more commercial rights
Novelty, uniqueness, and complexity combine to uncertainty of future regulation and laws for NFTs
Global reach and semi-anonymity further disrupts regulation
Criminal activity
High fees
Blockchain transactions fees, marketplace fees, and infrastructure costs cause expenditure upon purchasing an NFT
(typically between 1-10% of the price)
Sources: Schulte Research
36
Figure 24
Figure 23 shows the art market activity. Ethereum and Flow are likely winners in
this area. Figure 24 shows all the risks, and there are many.
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M O N E Y M E TAV E R S E
Section 2: The integration of crypto into the new blockchain rails created a digital
data transportation system that confers ownership. This is the metaverse. A perfect
“tangible” example of this metaverse is Somnium. Somnium is a self-contained VR
reality customizable and ‘lovable’ because it has AI capabilities that bring avatars to
life. It is a “persistent” social VR world. You can live in this world and buy, sell, transact, learn, shop, and travel. (Somnium means “dream” in Latin. Kepler wrote a book
called Somnium and anticipated space travel — in 1608).
Partners of Somnium
-level specifications
Pimax
Somnium has partnered with Pimax
-based domain
Somnium has partnered with Sony via their state-of-the-art 3D model creation technology
In addition, Sony houses a VR-based store within the Somnium universe that is one of the first in the world
Somnium is a part of the specialized Microsoft for Startups program.
Schulte Research
Bring advertising revenue for users on the platform
platform transactions.
-two solution offers speed and near-zero transaction costs for Somnium users with respect to on-
Sources: Metaverse series Part II
42
Figure 25
Partners of Somnium
OpenSea provides an accessibility, highly-liquid marketplace to empower these new economies, and offers tools that
permit developers to build such marketplaces for their digital assets
VR Education uses the Somnium space VR platform to enhance experiences and drive more education with respect to VR
adoption
Collaborative efforts towards constructing a truly decentralized and immersive metaverse
Schulte Research
Enabling teleportation between VR worlds
One of the most trusted and secure digital currency exchanges/custodians globally enabling customers to transact and
store digital assets
Sources: Metaverse series Part II
43
Figure 26
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Paul Schulte
People who never had a computer in their home wondered why you needed a
computer – until you got one. People who never had smartphones wondered why
you needed them — until you got one. The same will be true, in our opinion, for
new equipment which offers us a self-contained world of AI-driven entertainment,
learning, and commerce. This is the gamification of finance and investment. To
this end, Somnium has partnered with Sony, Microsoft, and Polygon, among many
others – Figure 25 and Figure 26.
Economy in Somnium
Product/service offerings that allow platform users to generate revenue
Schulte Research
Characteristics
Economic activities
VR-based economies are unfettered by restrictions such as physics
and geography
Tokenizing and selling their productions directly via open
marketplaces
Applications involving blockchain and digital asset
Owning and monetizing broader digital assets within the Somnium
Economy
Safety, privacy, encryption, traceability, and verifiability of ownership
of digital items/asset transacted on platform via the network.
VR world navigable by thousands of users simultaneously
Users to maintain full ownership over their digital assets/possessions in
the form of NFTs.
Creation, building, and monetization of land
Sources: Metaverse series Part II
44
Figure 27
Figure 27 is a taste of what is to come in the metaverse — everything can be tokenized in Somnium. Players have a digital wallet, NFTs, marketplaces, art, learning,
events, thousands of interactive friends, and even land.
Developers
Collectors
NFT collectors exhibiting their collections on their land as
well trading amongst each other
Entrepreneurs
Entrepreneurs can build and sell digital/tangible goods
Traditional companies
Schulte Research
Developers selling tokenized digital assets and avatars
Game developers
Cornerstone principles
Sominium Economy
Somnium Space monetization and business
models
Tokenization of virtual land
Tokenization of digital
assets/experiences
Decentralized marketplaces
Traditional companies and businesses creating a store presence within the Somnium Space
Game developers inserting short/large demos or gaming experiences into the Somnium Space
Sources: Metaverse series Part II
45
Figure 28
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M O N E Y M E TAV E R S E
Somnium Space monetization and business
models
Content creators
Content creators can showcase a variety of virtual
experiences (e.g., vlogs, commentary, etc.) and monetize
them within the Somnium Space/platform
Universities
Universities and other higher-learning institutions building
courses and experiences such as an immersive
planetarium
Artists
Artists can showcase a variety of creations such as 2D/3D
paintings and sculptures
Native token of Somnium: Somnium CUBEs
CUBEs can be used for a broad array of product/service
offerings including:
interacting in entertainment (e.g., race cars)
Schulte Research
land purchases or renting
digital asset/item sales in the marketplace
eCommerce
Streamers
Streamers (e.g., Twitch, etc.) having their own virtual studio from which they can record within the Somnium Space
Unity SDK
Developers can build anything – for fees or otherwise – and upload it via the Somnium Unity SDK for other users to engage,
interact, and transact with
Sources: Metaverse series Part II
46
Figure 29
Investing, Buying & Renting Land
Brand new area of virtual real estate
Overview
Value of parcels
Each land parcel is unique, unreplicable, non-forgeable, and has verifiable
ownership.
The value of various parcels within the Somnium Space varies as a function
of factors: popularity of areas, the view of different areas, size, etc.
Owners of these NFT-based land parcels have direct autonomy over
contents that are built on top of their land parcels
The average land parcel in the Somnium Space across the different size
ranges sold for roughly 6.57 ETH, or equivalently US$14,560
Throughout the COVID-19 pandemic, as more users enter the Somnium
scarce digital real estate within the Somnium Space will continue to
increase in value.
Schulte Research
Metaverse Property: the first VR-based real estate company in the entire industry
Property Management
Renting property to clients, maintenance of
technical and visual aesthetic, collecting rents from
clients
Property Development
Architecting, designing, and developing the build, as well
as establishing on-map development
Consulting
Helping property owners/renters make important
decisions in VR-based real estate using their
knowledge of virtual land across metaverses
Marketing
Metaverse Property has strong access to the burgeoning
advertising network that exists across the various
metaverses
Sources: Metaverse series Part II
47
Figure 30
The world of “Ready Player One” is here – Figure 28, Figure 29, and Figure 30.
The future of conferences is here. Think of a world where every elementary or high
school has a chance to become an avatar for their students. It is scary, but that is where
this is going.
PayPal is one of the major companies which is young enough to be hungry and
not yet old enough to rest on its laurels. It is aggressively moving forward with a
broader product range and expanding geographically. Square is also doing terrific
things in this area, but we prefer PayPal on valuation grounds.
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Paul Schulte
Visa vs. Mastercard vs. PayPal vs. Square
Content/Section Title
1.
2.
3.
4.
Products
Buy, hold, sell using Visa credentials
Cash-out to Visa credentials
Crypto APIs
Direct settlement in USDC
1.
1.
Customer segment
2.
Visa network to facilitate access for
partners to crypto APIs and transaction
settlement
B2B Visa Connect for blockchain crossborder payments
Visa sees a global opportunity in crypto,
besides China, which is restricted by Union
Geographies
Buy, hold, sell using Mastercard
credentials
Cash-out to Mastercard credentials
Crypto APIs
2.
3.
Cryptocurrency trading and as a funding
source
Adds a lower cost of funding for PayPal
Supportive of users & engagement
1.
2.
1.
Mastercard network to facilitate access
for partners to blockchain APIs (smart
contracts, fast pay network in P2P, P2M,
and B2B)
Stablecoins settlement in 2021
2.
Crypto Checkout: settled in fiat currency
Buy, hold, and sell Bitcoin, Bitcoin Cash,
Litecoin, and Ethereum
No Balance sheet exposure
Product exposures: benefits from buying
and selling via third-party Paxos. No
exposure to the volatility of underlying
crypto-assets
Looking for consumer protections, strict
compliance protocols with regulations, and
pure payment not as an investment in
potential crypto-assets
No direct exposure to crypto as Visa
enables partners to leverage crypto APIs
and access its network
Risk exposure
Schulte Research
Through partnerships and collaboration
Issuance of Mastercard credit cards with
crypto-related rewards
Plans on rolling out stablecoins settlement
in 2021
Through partnerships and collaboration
Issuance of Visa credit cards with cryptorelated rewards
Involvement in stablecoins
Crypto approach
PayPal users – Retail consumers
Mastercard network
Launch in the US first
UK rollout in Q3 2021
Transactions settled in fiat currency only
89 blockchain patents granted, 285
pending
Acquisition CipherTrade for crypto analytics
Transactions are settled in fiat currency
No private key issued: impossible to transfer
crypto out of digital wallet
Cryptocurrency trading and as a funding
source
Buys and sell crypto directly from its
customers
1.
2.
Buy, hold, and sell Bitcoin
P2P transfers
Balance sheet: holds $220m in Bitcoin
Product exposures: benefits from buying
and selling of consumers without volatility
exposure. Square earns spread from buying
and selling
Square users – Retail consumers
Launch in the US
network
Visa Research Team to improve scalability
and offline use of digital currencies
CryptoPunk
Plans crypto services integration in Brazil
Other
Withdrawing to an external wallet possible
Plans for decentralized exchange
Sources: PayPal public filings, Capital IQ, Credit Suisse, CNBC, Wall Street Journal, Pymnts, Financial Times
49
Figure 31
PayPal approach to crypto
Safe rollout on/off ramp to traditional crypto products in the US and in the UK
Crypto products: Crypto Checkout and PayPal Crypto
Products Overview
Crypto Checkout: Launch Q2 2021, cryptocurrency as a funding source to pay. Transactions settled with fiat currency1
Cryptocurrencies
Bitcoin, Bitcoin Cash, Ethereum, and Litecoin
International Expansion
Planned in H1 2021
Rationale
Adds a lower cost funding for PayPal. More supportive of users & engagement
Regulation
BitLicense from the NYState Department of Financial Services in Q4 2020
PayPal Crypto: ~2.5% take rate
Transaction fees
Schulte Research
PayPal Crypto: Buy, hold, and sell experience since Q3 2020 in the US on PayPal, Q2 2021 through Venmo
including variable fee based on the amount from 150bps to 230bps and a spread of ~50bps
Crypto Checkout: only spread on the conversion from crypto to US$
User engagement
Crypto users sign into the app twice as much as they did before buying crypto on PayPal
Cannot transfer crypto in and out of the wallet
Limitations
Limited crypto-assets available
Sources: PayPal public filings, Capital IQ, Credit Suisse, CNBC, Wall Street Journal, Pymnts, Financial Times
51
Figure 32
PayPal crypto investments
Indirect exposure to digital assets and blockchain-related companies via acquisitions, investments, and partnerships
Investments in the Crypto space
Company
Transaction
Details
Acquisition announced Q1 2021
Cloud-based wallet for storing and protecting digital assets using cryptography
Estimated ~$200 million
Bring secure-storage expertise
Private investment
Cryptocurrency tax software solutions for consumers and enterprises
Undisclosed amount
Serves regulatory agencies worldwide
Q1 2021
Partnership since Q3 2020
Powers
PayPal participated in Series C funding in Q4 2020
Crypto compliance and Risk Management
Private investment Q4 2019
Schulte Research
crypto service enabling US users to buy, hold, and sell crypto
APIs, market expertise, and regulatory framework
PayPal participated in Series D funding in Q2 2021
Anti-money laundering, prevent fraud, and compliance
Acquired by Blockchains Management in Q4 2020
Blockchain-based identity management and compliance software solutions for
financial institutions
Private investment in Q4 2019
Deal fell through Q4 2020
Crypto custody and trading firm
Estimated ~$750
Sources: PayPal public filings, Capital IQ, Credit Suisse, CNBC, Wall Street Journal, Pymnts, Financial Times
52
Figure 33
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M O N E Y M E TAV E R S E
Visa approach to Crypto
Crypto steps as partnerships instead of solo initiatives, with the aim to provide ecosystem infrastructure surrounding crypto
Late implication but significant impact in the crypto space
Created Zether1 & Fly Client2
Different approach than Square or PayPal, as in Visa takes crypto steps as
partnerships instead of solo initiatives
Team is now focused on new mechanisms to improve scalability and
enable offline digital currency transactions
Collaboration with the World Economic Forum on a set of policy
recommendations for central banks exploring CBDC
Offline use of CBDC transactions via Bluetooth or NFC to
expand financial inclusion by helping unbanked individuals
2016
2018
Announced B2B Connect with Chain Core,
enterprise blockchain infrastructure
Patent blockchain-based transaction system
Partnership BTL cross-border settlement
Schulte Research
Visa Research Team
Visa approach to crypto came later than its direct competitors
2020
Engagement with World Economic Forum
Circle joined Visa Fintech Fast Track
Settlement of USDC in fiat currency
Partnership IBM
Integration open source Hyperledger Fabric
Pilot phase B2B Connect in collaboration with
Commerce Bank, Shinhan Bank, Union Bank,
and United Overseas Bank
FIS integrated Visa B2B Connect
Commercial launch B2B Connect
Collaboration Infosys
Patent for digital fiat currency
2017
Settlement in USDC directly
Launch API Offerings for First Boulevard
Partnership with Tala for API Offerings
2019
2021
Sources: Visa public filings
(1) Zether is a privacy-preserving payment mechanism. JP Morgan Chase announced plans to integrate into its own blockchain efforts.
(2) FlyClient is a framework that makes it easier for mobile devices to validate blockchain transactions
54
Figure 34
Visa crypto and blockchain partnerships
Visa estimates that these partnerships could yield 50m+ new Visa credentials1
35 partnerships in the Crypto space2
Details
Details
Transactions settled in UDSC, stablecoin powered by Ethereum
Circle Visa Corporate Card to spend USDC
Improve process of interest disbursements and create new crypto
products
First Federally Chartered Digital Asset Bank
Powers Visa crypto-native settlement with USDC through APIs
Exclusive relationship with Visa2
World
Economic
Forum
Fiat lending with crypto collateral via Crypto.com Visa Card at 9.9%
interest. Up to 8% cashback on purchases
10 million users
Visa Cards
Visa engaged with policy makers and organizations to shape the
future of digital currencies
Visa provided set of policy recommendations for CBDC
USDC co-founded with Circle
Schulte Research
Rewards program of 4% in Stellar or 1% in Bitcoin
International B2B Payment Solution
technology since 2017
Visa
Innovation
Program
Partnership for development of new Fintech solutions powered by
blockchain technology for B2B and cross-border payments
Visa Fintech
Fast Track
Example Visa leveraging partnerships
Co-founded
Created USDC
Blockchain based solution for cross-border money transfer
Log sentinel: Secure audit trail solutions through blockchain
Mobile blockchain-based loyalty program
pay with Visa at over 70m+ merchants
Most crypto partnerships have been borne out of this program
Anchorage powers
Partnership
1st USDC-settled Card
Sources: Anchorage, Business Insider, Circle, Crypto.com, Coinbase, BlockFi, Fold, Binance, Xapo, Line, Visa public filings, Nasdaq, Centre, Paytm, Bitpanda, Lastbit, Coinzoom
(1) Table is non-exhaustive. 35 digital currency platforms and wallets. Alfred Kelly, Visa CEO at Q2 2021 Earnings Call on 27th April 2021
(2) Ryan McInerney, Visa President at KBW Fintech Payments Conference on 23rd February 2021
55
Figure 35
Purchase
Schulte Research
APIs2
Settlement
Differentiated value: brand, capabilities, reputation, safety, security, and experience1
Working crypto exchanges and wallets to allow customers to cash-out onto a Visa credential
Opportunities in the cross-border B2B space
APIs to offer the ability to purchase, custody, and trade cryptocurrencies
Partnership with Anchorage to provide back-office infrastructure
Visa Key Partnerships
Cash-out
Wallets and exchanges to use Visa credentials to purchase cryptocurrencies
Settle in digital currency starting with USDC stablecoin
Potential for crypto settlements for their B2B Connect product
Sources: Visa public filings
(1) Alfred Kelly, Visa CEO at Goldman Sachs Technology & Internet Virtual Conference on 11th February 2021
etwork for the neobank and clients
s customers will have access to USDC for remittances
Figure 36
12
56
Paul Schulte
Stablecoins settlement and Anchorage
Coinbase, Visa, Circle, and Anchorage working together to bridge the gap for USDC adoption via settlement on Visa Card
Stablecoins
Visa started investing in stablecoins
20 months ago1
Anchorage partnership
backed 1:1 with fiat currencies
First federally chartered digital asset bank
over
Exclusive Visa digital currency settlement partner to provide back-office
infrastructure, such as custodial, security services, accounts tracking, etc.
Visa upgraded infrastructure to enable partners to settle in digital currency
starting with USDC stablecoin
Launched pilot of USDC settlement with Crypto.com Visa Card
Increased conversation with central banks about designing CBDCs2
Anchorage and Visa plan to expand to other partners soon
Visa sees potential for crypto settlements for their B2B Connect product3,
leveraging Circle partnership to enable payments with crypto wallets3
Besides Crypto.com Visa Card, USDC standard settlement process requires
partners to settle in a traditional fiat currency
Schulte Research
Share of Total Stablecoin Supply
Total Stablecoin supply in US$ bn
Sources: Visa public filings, Coin metrics
(1) Ryan McInerney, Visa President at KBW Fintech Payments Conference on 23rd February 2021
(2) Oliver Jenkyn, Visa Executive President at Morgan Stanley TMT Conference on 1st March 2021
(3) Vasant Prabhu, Visa CFO at Wolf Research Fintech Forum on 10th March 2021
57
Figure 37
Visa vs. PayPal. Figure 31 to Figure 37 review our work comparing Visa, MasterCard, PayPal, and Square. Every time you turn around, Visa is in the right place and
at the right time. Figure 34 to Figure 37 review the partnerships and product launches
that allow Visa to go from strength to strength and remain highly relevant and profitable. It is a marvel how a monolithic credit card company managed to pull this off.
And valuations are simply not demanding. As the Cold War with China accelerates
and the NATO alliance takes a much more aggressive line toward China not only to
contain it but to weaken it, Visa is in an advantageous position to challenge Alibaba
and Tencent.
BOTTOM LINE: Blockchain confirms identity, so we need digital theft insurance (for cases like blackmail and kidnapping). It ensures trades, so we need
digital fraud insurance. It proves property ownership, so we need digital property
insurance. It confirms intellectual property, so we need digital insurance remedies
for corporates, patents, trademarks, and copyrights. It secures smart contracts, so
we need insurance for digital breaches of smart contracts. And blockchain CBDC
will require a substantial new market for digital insurance for sovereign CBDC distribution (counterfeit insurance), store of value (deposit insurance), and means of
exchange (fraud and larceny).
This is the real Insurtech that the world craves. It is nowhere in the current
crop of Insurtech. Our real worry is that by the time this generation of Insurtech
13
M O N E Y M E TAV E R S E
makes the transition from a “half in and half out” approach involving off-the-shelf
digital solutions to physical harms, they will have missed the boat when it comes to
the purely digital world of blockchain-based solutions. This is true terra incognita
where there are NO incumbents. Entities like Sygnum and Silvergate are quickly
filling this void.
Section 3: The new crypto exchanges and banks have finally gotten big enough to
merit their sector.
Company overview
Towards full-stack crypto platform, from trading crypto to providing services for DeFi, NFTs, cloud, lending, and derivatives
Business model
Go-to-market strategy
Easy-to-use platform for accessing the broader cryptoeconomy by
investing, spending, saving, earning, and using crypto
Retail: provides investments, storage, spending, earning, and use of crypto
assets
Build brand as trusted space
Institutions: provides hedge funds, money managers, and corporations a
one-stop-shop for accessing crypto markets through advanced trading
and custody technology
Focus Coinbase Cloud, equivalent to Amazon Web Services (AWS) for the
global cryptoeconomy
Ecosystem partners: provides developers, merchants, and asset issuers a
platform with technology and services that enables them to build
applications that leverage crypto protocols, participate in crypto networks,
and securely accept crypto as payments
Continuous development of new products and services to enhance value
for consumer and business partners
Since inception, c.US$3.4 bn in revenue, largely from transaction fees
earned from volume-based trades by retail users and institutions
Goals
Limitations
Create a one-stop shop for institutional investors and solve ecosystem
issues:
Due to a different standard of regulatory scrutiny, competitors:
1. Operate under less stringent local rules and regulations;
Lack distribution, trust and usability
2. Can more quickly adapt to trends;
Schulte Research
Availability of easy-to-use and scalable infrastructure
3. Support a greater number of crypto assets; and
Offset effects of any future fee pressure due to economies of scale
4. Develop new crypto-based products and services faster
Proprietary full-stack scalable infrastructure surrounding crypto (e.g.,
blockchain integrations, crypto compliance infrastructure, cybersecurity,
cryptography)
Reliant on crypto asset volatility
Uncertainty regarding regulatory framework globally
Sources: Coinbase public filings
60
Figure 38
Future prospects, products, and services
8.8m Monthly Transacting Users, 9k institutions, and 160k ecosystem partners as of Q2 2021
New products and services developments
Coinbase direct listing implications
Coinbase Asset Hub to help asset issuers integrate tokens with Coinbase
Bitcoin-collateralized loan product and a staking product 6% APR for staked
ETH2
1. Public listings amongst crypto firms;
2. Greater legitimacy of crypto within global finance;
Coinbase Cloud powered by Bison Trails for new suite of cloud-based crypto
computing services (similar to AWS)
3. Bridging the gap between crypto and traditional investors;
4. Playing a pivotal role in
; and
Smart order router product for institutional investors, routing orders to the
exchange with the best pricing amongst 10 liquidity venues
5. Increasing the market capitalization of large crypto assets through
enhanced investor participation
Launch Crypto Council for Innovation in partnership with Fidelity, Paradigm,
and Square: help regulators, policy makers to understand crypto
Recent partnerships with PNC Bank, SpaceX, Tesla, Third Point, and
WisdomTree Investments
Outlook and future potential for growth
Non-fungible tokens (NFTs) represent unique opportunity to transform the
relationship between creators and consumers
Now offers reward across six tokens, including ETH2 staking
Launch Coinbase Card and Coinbase Prime brokerage
Schulte Research
Diversification revenue streams with addition of new products and services,
notably Coinbase Cloud
Acquired Skew for institutional data analytics
Future growth in nascent services for institutional investors such as Borrow &
Lend in addition to Trading and Custody
Crypto long-term prospects (i) crypto as an investment; (ii) as a financial
service with the rise of DeFi; and (iii) as an app platform such as NFT usage
Lending with Ethereum as collateral provided enough liquidity
Sources: Coinbase public filings
61
Figure 39
14
Paul Schulte
Quarterly catalysts 2021 earnings
Catalysts Q1 2021 earnings
Catalysts Q2 2021 earnings
Higher MTUs and elevated trading volumes per MTU
MTUs +44% QoQ to 8.8m
Addition 7 new assets for trading and 13 new assets for custody
High volatility with Bitcoin reaching c.US$64k in April followed by c.45% drop
to c.US$30k
Growth institutional trading customers and volume traded per institution
Assets on Platform c.US$180 bn, -19.3% QoQ
Growth institutional interest in Ethereum and other crypto assets for
commerce, payroll, and custom white label solutions
Elevated Trading Volume at c.US462 bn, +37.9% QoQ driving trading
revenue growth
Substantial growth Subscription and services revenue
Increase interest in stablecoins, added support for Tether
Top 10 free app on iOS and Android
Schulte Research
Outlook Q3/Q4 2021
Lower MTUs and
Lo
d ttotal
t l Tradi
Trading Vol
Volume iin Q3 compared
d tto Q2
Meaningful growth institutional revenue in 2021 driven by transaction and
custody
Increase ARPU compared to historical US$34
45 per month
Sources: Coinbase public filings
62
Figure 40
Coinbase has been a preferred holding for us, but we must admit there is much
resistance among our client base. Its move from higher-margin consumer to lower margin but more reliable (and much higher volume longer-term) enterprise customer has
investors nervous. Also, Coinbase’s strategy of bigness and cartel structure is the kind of
structure that crypto is precisely designed to undermine. We do not see “strong hands”
holding Coinbase despite compelling valuations – Figure 38, Figure 39, and Figure 40.
SEN Leverage product
Access to capital through US$ loans collateralized by bitcoin
Provides credit
Enters into an
agreement with the
Bank to borrow US$ to
deposit at exchange
US$
leverage account on its
platform
EXCHANGE
EX
TRADER
ADER
Settlements
M
Maintains order
book
Executes tradess
Moves assets
Holds assets
US$ & Bitcoin
Schulte Research
Exchange uses SEN to
Holds/moves
assets
(Collateral)
US$ & Bitcoin
Trading activity
SEN US$ Transfers
Sources: Silvergate public filings
65
Figure 41
Silvergate vs. Sygnum. These are the first two purely “digital universal banks”.
Among its similar peers, Silvergate is trading at a sharp premium on P/E and P/B, so
we think it may have a breather here. It has a solid business model and a good product
line. Figure 41 explains the business model very simply.
15
M O N E Y M E TAV E R S E
approach to digital assets: custody as
first layer
Create series of global partnerships to launch a comprehensive suite of crypto products and services
Institutional-grade security to invest in the digital asset economy
Development
Launched institutional-grade access to DeFi in Q2 2021
Partners
Co-developed custody platform with Custodigit, a joint venture with Swisscom
Schulte Research
Competitors
Examples
cryptocurrencies
supported
Bitcoin
Aave
Ethereum
1inch
Ripple
ICP
Litecoin
Maker
Tezos
Uniswap
Sources: Sygnum public filings
69
Figure 42
Brokerage and trading: 2nd layer;
Lending: 3rd layer
3rd layer: lending
Schulte Research
2nd layer: brokerage
Extending to brokerage and trading for crypto, and lending via crypto-collateralized LTV
Brokerage and trading services for digital assets in a secure and seamless way
Brokerage
Trade BTC, ETH, XRP, XTZ, LTC, BCH, and DeFi tokens
Exchange from major fiat currencies (e.g., CHF, EUR, SGD, USD)
Functionalities
Settlement within Sygnum platform
Regulated European OTC options for BTC and ETH
Increase fiat liquidity against digital assets (e.g., Bitcoin, Ethereum, XRP, Litecoin, Bitcoin Cash, and Tezos)
Investors
Interest paid on actual drawings to dynamically adjust liquidity based on current needs
Flexible Loan-To-Value (LTV) to optimize interest rates charged on loan amount
Flexible LTV
Achieved through LTV of c.40%
Sources: Sygnum public filings
Sources
70
Figure 43
Asset management and DeFi: 4th layer
Asset management
Focus on asset management: vehicle for digital asset and high net worth investors
Customer segment
Sygnum Platform
Winners Index ETP
First focus on digital asset investors, second for high-net-worth investors via ETP
Provides range asset management investment products including alpha-oriented multi-manager fund
Tracks index leading protocol tokens, dynamically weighted by real world adoption, tracking the network effect
of the investor, user, and developer communities
Fully collateralized and physically backed, beta exposure to blockchain protocols
Launched regulated banking services for DeFi tokens, first step in
ambition
Next focus on suite of DeFi yield-generating products and services across banking and asset management
offering
Finally, custom solutions for clients with selected DeFi partners
DeFi
Schulte Research
Platform DeFi
DeFi tokens
Aave, Aragon, Curve, Maker, Synthetix, Uniswap, 1inch Network, USDC, Bancor, Chainlink, Compound, Polygon
Sources: Sygnum public filings
Sources
71
Figure 44
16
Paul Schulte
Tokenization of physical assets and Bank-tobank white-label as 5th and 6th layer
Tokenization of physical and digital assets and white-label for traditional financial intermediaries
Tokenization physical and digital assets, focus on equity shares next
Tokenization
For example, Digital Swiss Franc (DCHF), wine in collaboration with Fine Wine Capital, and Fillette au
Artemundi
by Picasso with
Primary market issuance platform
Desygnate
Digital securitization of assets on the blockchain
Increases efficiency of capital raising and automates corporate housekeeping processes
Secondary market trading venue
SygnEx
Access to Venture Capital, Mid Cap, Real Estate, and Arts & Collectibles
Schulte Research
Payment and settlement instant and direct with Digital CHF token
Provides regulated digital asset products and services through B2B banking and operational compliance services
Bank-to-bank activity
One-stop-shop modular suite of banking services including accounts, payments and custody, brokerage, tokenization,
lending, and asset management
Partners can broaden offering and access new client segment, with wallets segregated off balance sheet
Sources: Sygnum public filings
72
Figure 45
Silvergate also has impressive marquee partnerships. Sygnum also has an impressive array of partnerships – Figure 42. Sygnum, as we see it, is looking to act
as a global crypto exchange to legitimate the coming world of NFTs. It uses its
exchanges to create liquidity, increase product range, offer leverage, and become a
significant asset manager of crypto assets – Figure 43 and Figure 44. In Figure 45,
it also wants to become a white label connector between crypto and banks. Sygnum is finishing a Series A imminently but is in the right place at the right time
and working very closely with Swiss and Singapore regulators to embed crypto
into the financial system as a legitimate asset class with which regulators can feel
comfortable.
Exchange revenue model
Redesigned the exchange to benefit asset holders, enable traders, & increase market integrity
Generated from trading activity
attributed to margin trading and
interest received
Margin interest fees
Market making fees
Spot (Maker) fees: 10bp
spread
Net revenues
Charge 25% on all revenues
Traders
Generated from trading activity on the
G
hybrid order book
No taker fees
Share weighted
Liquidity
providers
Schulte Research
Bullish Treasury
Sources: Bullish SPAC Investor Presentation
78
Figure 46
17
M O N E Y M E TAV E R S E
Circle and Bullish are hybrid entities — think of Cisco and BAML for crypto.
Circle can be a powerhouse in this space, but its valuation out of the SPAC gate is
very rich, and it has a narrow pool of customers. It is bleeding losses also. Circle is
an important player, but the stink of SPAC lingers. Circle is no exception. Beware.
Lastly, we look at Bullish. It is a pure-play — for now — on its holdings of BTC and
Brendan Blumer’s EOS. Its platform will be operational sometime in 2021. The exchange model is in Figure 46. Is this another potentially great company that lists too
early when it is only half-baked?
Section 4: Additional research in PowerPoint format.
Schulte Research
Chapter I: NFTs and Crypto
13
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players
NFT
Intellectual property
Crypto
Fintech
Property
Money
Insurance
Art/Wine/Sports
NFTs
Gaming
Rewards and incentives
China key players
Insurtech
Proptech
Risks
Schulte Research
Monopoly behavior
Antitrust hindering
development
Railroads Required
Blockchain (e.g., BSN)
Central Bank Digital Currency
Incentives to develop
proprietary technology
Fragmented data
Public trust
Sources: Schulte Research
14
18
Paul Schulte
Stablecoin use cases
Stablecoin is faster, lower cost, borderless, transparent, and programmable
Settlement
Payments
Operates 24/7 allowing instant
transaction
Avoid transaction fees that
accompany the intermediary
processing fees
Remittance
Lending & Alternative Banking
Schulte Research
Avoid high fees related to crossborder payments
Inherent price stability could lower
fees further
Lending is high yield opportunity for
debt investor
Only need internet access to own a
stablecoin bank account, increasing
bank accessibility
Payroll
Escrow
Streamline sending and converting
payroll
Automate escrow process through
smart contracts
Sources: Medium.com
15
Stablecoin categories
Growing base of stablecoins displaying a movement beyond traditional crypto use cases
Fiat-backed
Coins backed by a corresponding US$ in a treasury
Crypto collateralized
Interest-bearing
Token created to represent stablecoin deposit earning interest
Backed by SNX holders who are rewarded for providing collateral and stability
with fees generated by Synth transactions
Synthetic
Schulte Research
Stablecoin collateralized by other digital assets (e.g., ETH, BAT, USDC)
Algorithmic
Coin programmed to optimize search of highest yield opportunities
16
DEX Volume Growth
DeFi has gained immense traction
automates exchanges, portfolio management, lending, and market-making functions
DEX Volume1
Data in US$ bn
162.8
142.0
92.7
86.2
95.3
87.0
62.3
49.5
39.5
Schulte Research
30.9
14.0
0.7
1.5
1.7
1.0
1.2
1.9
1-Jan-20 1-Feb-20 1-Mar-20 1-Apr-20 1-May-20 1-Jun-20
21.4
18.1
26.3
4.9
1-Jul-20 1-Aug-20 1-Sep-20 1-Oct-20 1-Nov-20 1-Dec-20 1-Jan-21 1-Feb-21 1-Mar-21 1-Apr-21 1-May-21 1-Jun-21
1-Jul-21 1-Aug-21 1-Sep-21
Sources: Dune Analytics
(1) DEX is a decentralized exchange volume tracker provided by Dune Analytics
17
19
M O N E Y M E TAV E R S E
Crypto lending
Crypto lending booming
a trend picked up by blockchain projects
Obtains crypto loans
Deposits fiat currency
Lender
Borrower
Deposits crypto assets as collateral
DeFi Lending
Platform
Schulte Research
Repays the loans with interest
Receives collateral back after
repayment
Receives funds back with interest
(passive income)
Sources: Medium.com
18
NFTs: Crypto Art Boom
NFTs have grown to account for c.10% global art market sales where Millennials account for 71%+ resell art
NFT sales by category
Collectibles
NFTs quarterly sales1
Sports
Games
Art
Utility
Data in US$ m
Metaverses
$2,929.2
5% 3%
11%
40%
10%
Schulte Research
31%
$424.0
$9.2
$7.7
$18.4
$31.6
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
$503.9
Q2 2021
Q3 2021
Sources: Consensys, NonFungible
(1) Q3 2021 until 15-Sep-2021 included
19
Digital currency: institutional investors
CBDCs as the first step to democratization of digital currencies
Remarks
Primary role for a crypto in a portfolio or treasury account
The Economist survey of 200 institutional investor and corporate treasury management
Issuance of CBDCs necessary to establish functioning market for new
financial instruments
digital currencies
Capital appreciation, 33%
will increase demand for other forms of
Alternative asset diversification, 31%
Institutions sees a demand for international institutional-only currency
exchange platform
Monetary transfers for large settlements, 29%
Increased regulatory clarity needed
F/X or currency exchange, 28%
Preference for transactional use in the future, but currently used as a store of
value
Hedge against inflation, 28%
Schulte Research
Governments and regulatory entities:
1. must work together to bring clarity and investor protection when
investing in crypto-assets; and
2. must educate and provide guarantees for both investment in
crypto-assets as a store of value and as a medium of exchange
Hedge against low interest rates, 27%
Protection against geopolitical uncertainty, 25%
Simplified digital settlement/transaction only, 24%
Speculation, 21%
Deflation protection, 16%
They should have no role, 1%
Sources: The Economist Intelligence Unit: Digimentality 2021: Digital currency from fear to inflection
20
20
Paul Schulte
Digital currency: institutional investors
Catalysts and obstacles to acceptance of digital currencies
Primary triggers to enhanced activity in digital currencies
Primary obstacles to institutional investor of digital currencies
The Economist survey of 200 institutional investor and corporate treasury management
The Economist survey of 200 institutional investor and corporate treasury management
Wider adoption of CDBCs, 31%
Market trust or understanding of digital currencies/assets, 47%
Availability institutional-only digital currency exchange, 29%
Financial market structures, 43%
More robust AML controls, 25%
Increased economic instability, 25%
Asset volatility, 36%
Sharp rise in other asset prices, 23%
Support digital currencies by leading corporations, 23%
Reduction purchasing power, 21%
Provide regulatory
framework and
institutional investor
protection
Sharp fall in other asset prices, 21%
Internal technological challenges, 32%
Regulations, 32%
Lack of related digital financial services, 27%
New regulatory framework, 21%
Lack of corporate support, 24%
Schulte Research
Rising interest rates, 19%
Continued low negative interest rates, 18%
Insufficient interoperability, 19%
Significant social unrest, 13%
Sources: The Economist Intelligence Unit: Digimentality 2021: Digital currency from fear to inflection
21
Digital currency: consumers
Need to educate consumers on the benefits of cashless society as catalyst to widespread acceptance of digital currencies
Remarks
Consumer expectations of major barriers to cashless society
The Economist survey of 3,053 people in February and March 2021
Covid-19 heightened use case for digital currencies/assets especially
CBDCs and open-source digital currencies
Actual public use of CBDCs is extremely limited and primarily in test phases
Habits with physical cash, 40%
Move to cashless society increasingly accepted and anticipated by
consumers
Understanding of the technology, 38%
Data privacy concerns, 36%
Governments and Businesses as key players for the current trend towards
digital cash
Low customer acceptance, 29%
Benefits include contactless transactions, real-time monitoring, and
improved money laundering initiatives
Unable to pay small transactions, 25%
Risks include asset volatility and uncertainty regarding market structures and
regulations
Government regulations, 20%
Unproven technology, 14%
Schulte Research
Low business acceptance, 13%
Need to educate
consumers on the
benefits of cashless
society
Ease of use inadequate, 12%
Don’t know, 5%
Other, 2%
Sources: The Economist Intelligence Unit: Digimentality 2021: Digital currency from fear to inflection
22
21
M O N E Y M E TAV E R S E
Schulte Research
Section 1: NFT landscape
23
Summary
Schulte Research
Special benefits, opportunities, and use-cases
Authenticity
Validity, uniqueness, and properties
are immortal and decentralized
Connectivity
Immediate access to creators,
buyers, and sellers globally
Smart contracts
Enable price-fixing, royalties, loyalty
rewards, and infinitely many other
functions
Fresh engagement
Incentivise fans and encourage
repeat-purchase of other products
Provide voting rights, with all of the
above benefits
Transparency, yet
anonymity
Assets owned on public keys, visible
and tracked, without direct
identification
Decentralized
governance
Immutability
Once minted, an NFT is immutable
Metaverse immersion
Ownership is validated by the
underlying blockchain
Security
Inclusion
A key step towards a digital,
tokenised world. More
interoperability and sectors must
follow
Involvement of the general public
into any space
Sources: Schulte Research
24
NFTs unique representation of a digital file
Exist on the blockchain: capable of exchange and ownership, with the benefits of immutability, traceability, and security
Accessibility
Schulte Research
Uniqueness NFT
Anyone can purchase (or even create) an NFT
Most popular public marketplaces: OpenSea and Rarible
Unique: can not be interchanged with another
Underlying digital file allocated to single owner on the blockchain
Similar to cryptocurrencies
Controlled by private
cryptographic key
Most users connect to a wallet (i.e., Coinbase) to the marketplace, allowing non-custodial storage
Laws and regulations
The nascency of NFTs limits the associated laws and regulation currently
Minting
Smart contract
Process of converting a file to an NFT
Usage and ownership of an NFT igoverned by smart contracts
25
22
Paul Schulte
Initial applications of NFTs
Applications of NFTs are broad and growing
Entertainment
Own sporting moments, film characters, or amateur memes
Store assets safely, relying on underlying wallet
Collecting
Unique ownership of an item, with continual proof of authenticity
Anyone can share their talent publicly and own it indefinitely
Creation
Claim royalties on future sales, guaranteed by smart contracts
Voting functions (i.e., choosing next signing for sport team)
Governance
Could develop to decentralization of political and corporate decisions
Offers a new item to wager
Schulte Research
Gambling
the digital file itself
Zed Run has sold tens of thousands of virtual horses that can be bred and raced for money up to US$65 k
Investing
Uniqueness of assets leads to appreciation in price as popularity grows
Both in gambling format and with a more recreational focus
Gaming
In-game items are tokenised, to be exchanged outside of the game
Sources: Schulte Research
26
NFTs trends: integrate financial frameworks
Integration into DeFi and Portfolio management
Virtual objects type of cultural capital
Traditional and emerging art expected to be integrated into emerging financial frameworks
Schulte Research
DeFi
Collateral for borrowing or
fractionalized
Portfolio management
Attached to fixed income
instruments
Government participation tokens
Sources: Blockchain Council
27
NFTs trends: metaverse, DAOs, digital museums
Difficult to implement in the fiat universe
Schulte Research
Ethereum
to send and lock NFTs to individual
addresses
Decentralized autonomous
organizations
Applications
Software-defined investment
collectives that bid on the acquisition
of artistic expressions
Sources: Blockchain Council
28
23
M O N E Y M E TAV E R S E
NFTs trends to watch: multichain and institutional
protocols & networks
IPFS and multi-chain support to avoid losses of digital assets in case of blockchain discontinuity
IPFS and multi-chain support
Enterprise IP networks and emerging media
Token market collapse in 2018 caused majority of crypto community
to shift focus to institutional enablement models
NFTs allow ownership of a reference to a file stored on IPFS
Led to proprietary protocols and networks
Problem: if business ceases to exist, unclear what happens
to your digital asset
Schulte Research
Resulted in digital asset and consultancy programs aimed
at developing blockchain controlled operations
Expect similar chain of events in traditional media: film, music, and
art
Possible solution: IPFS secures NFTs in the multichain world
Sources: Blockchain Council
29
NFTs provide new opportunities within
entertainment
Secure and reliable revenue stream, providing traceability, engagement, and governance
New revenue stream
Offerings and transactions can continue outside of the sporting-season
Security and traceability of all tickets
Ticketing
Tickets with fixed price on the blockchain, preventing scalping and touting
Fan engagement
Customer relationship
management
Schulte Research
Fans are willing to pay to for inclusion and interaction
Advertisement
Exclusive offers and loyalty rewards tracked and distributed via ownership of NFTs
Data value at the core
Ownership segmentation, quantity, and composition within a wallet offer insights to the customer base. Leveraged for
tracking improvement, advertising, and collaborations
High-profile NFTs draw attention to the underlying entertainment (e.g., NBA Top Shop for the NBA)
Governance
Fans can contribute to decisions: revenue generation and benefit from wisdom of the crowd
Sources: Schulte Research
30
Crypto is the cashflow, NFTs are the assets
Nascent market expanding at a rate that can not be ignored
Transaction volume
Famous NFTs
Schulte Research
Ownership of a file?
Pandemic as a catalyst
c.US$2.5 bn of sales in H1 2021
CryptoPunks have had more than US$1 bn in volume
Beeple
Everydays
the most expensive NFT ever sold for US$69 m
How can it be pictured in this PowerPoint, yet sold for US$69 m?
Comparable to photographing or copying the Mona Lisa: the value is in unique ownership
The pause in entertainment and sport required a new way to engage and monetise fans worldwide
Aligning with the surge in blockchain-based products
31
24
Paul Schulte
Ethereum and Flow as primary contenders for
the underlying blockchain
Optimal choice of blockchain depends on the purpose of the NFT
Majority of NFTs are built upon Ethereum
2nd largest market capitalization cryptocurrency, robust ecosystem of users, developers, wallets, and applications
Ethereum
Transaction fees are high, due to gas fees (compensation for miners in the Proof-of-Work blockchain validation)
Ethereum moving to Proof-of-Stake consensus mechanism
Some companies opt for a 2nd layer network on top of Ethereum, to achieve lower fees and higher transaction speed
Hosts NBA Top Shot
Energy-efficient blockchain transaction validation approach. Lowering gas costs, to encourage developers and customers
Built to have a greater throughput
Schulte Research
Early-stage, causing limited developer and application ecosystem
Proof-of-Stake mechanism causes energy/environmental advantage over Ethereum (temporary advantage)
Considerations include transaction costs, throughput, applications and developer ecosystem, extent of decentralisation, and degree of focus on NFTs
In the future, NFT infrastructure could become interoperable inter-blockchain
Sources: Schulte Research
32
Minting protocol to access public ledger, become immutable, and tamper-proof digital art
Minting
Storage
Directly on the blockchain: however, limited storage capacity limits
size file to avoid large costs
Digital contents decided for the NFT
Cryptographic key generated to create token on the blockchain
Decentralized: NFT content spread across distributed network (P2P
storage)
Properties (i.e., name, description edition, and file size) included in
the minting
NFT becomes immortal and immutable on the blockchain
Schulte Research
Centralized: Cloud storage cheap and readily available, however
trust and reliability required to avoid losing NFT on discontinued
blockchain
Minting dictates the smart contract: governs future behaviour of the
NFT, including royalties, provenance, and functionality
Custodial and non-custodial wallets: easy access for the general
public with security reliant on wallet-provider
Schulte Research
NFT minting platforms suitable for particular needs (e.g., Rarible to
Bitski NFT drop for Adidas offerings)
Minting can contain reference to the digital file instead of the
complete digital file
Sources: Schulte Research
33
Marketplace is another decision for NFTs
Open marketplaces
Crypto native curated
marketplaces
Existing closed
marketplaces
White-labelled
marketplaces
Anyone can create then sell NFTs
Cryptocurrency only for transactions
Similar functionality to open marketplaces, except that creators require approval
More general-public focused
Custodial and accepting of fiat currency (often via card payment)
Varying levels of infrastructure, including a storefront, branding, and back-end
Schulte Research
Largest and oldest (2017) NFT marketplace
Community-centric (2020)
RARI token provides governance rights to holders
Sources: Schulte Research
34
25
M O N E Y M E TAV E R S E
Further opportunities for NFTs
Loyalty
Gamifying
Governance
Schulte Research
Metaverse cohesion
Analyze fan data with
pseudo-anonymity
Ticketing
Incentivize habits and behaviour of fans
Smart contracts facilitate rewards for tailored actions
Tokens can make attendance (and spending on related products) quest-like, again driving engagement
Fans gain voting rights and can compete in online leaderboards (e.g., choosing a fantasy team)
Offers revenue stream and enhanced engagement
Immerse fans into a virtual world
Harness collaborations with other NFTs
identity
Marketing strategies can be evaluated
Before the event, it can regain royalties on secondary sales and has clear validity
Post-event it survives as a collectible/memento
Sources: Schulte Research
35
Key risks associated with NFTs rollout
Volatility
Environmental
Licensing
Schulte Research
Regulatory
NFTs are difficult/impossible to value, due to their unique nature. Combined with rapid and global exchange; prices
change quickly
Ethereum, currently the leading blockchain for NFTs, demands vast amounts of energy for its Proof-of-Work structure
Ethereum switching to Proof-of-Stake consensus mechanism
Owners-rights are dependent on the marketplace and NFT, these should be reviewed prior to purchase
Newer projects are offering more commercial rights
Novelty, uniqueness, and complexity combine to uncertainty of future regulation and laws for NFTs
Global reach and semi-anonymity further disrupts regulation
Criminal activity
High fees
Blockchain transactions fees, marketplace fees, and infrastructure costs cause expenditure upon purchasing an NFT
(typically between 1-10% of the price)
Sources: Schulte Research
36
26
Paul Schulte
Schulte Research
Section 2: Metaverse case study: Somnium Space
37
What is Somnium?
Metaverse: collectively shared virtual space that arises through convergence of virtual and augmented reality, and Internet
Schulte Research
Somnium is a metaverse implementation
Open, social, and persistent VR world with its own economy and currency, marketplace, social
experiences, games, land ownership, and more
Open, social, persistent Blockchain VR metaverse
Built with proven/secured standards
Ownership security
Variety of creative tools: software development kit (SDK),
Builder, etc.
Origin authenticity
Cross-platform VR client
Tradable/translatable via decentralized marketplaces
Sources: Metaverse series Part II
38
Metaverse mechanics
Schulte Research
A metaverse VR world on Ethereum
Cross-platform usability
All major VR headsets
Social
Persistent social VR world
Customizable PC client
Somnium users create and manage
own layout setup for quick and easy
in-game interactions
Ownership
Ownership of virtual land
Long-term livability
automated recording mode for
-game avatars on their
properties that enables an AI-based
analysis to bring avatars to life
Programmability /
scriptability
users can program/develop personal
experiences within the Somnium
universe, as well as monetize these
developments via the asset store or
on their property
Blockchain integration
operates on top of the Ethereum
blockchain network, which enables
transparency and authenticity for
transactions, thus verification of
ownership of a wide variety of digital
assets across the platform including
virtual land, avatars, wearable
items/accessories, and other digital
goods
Space monetization
fully programmatic VR advertisement
plug-in enables users/developers to
capture and analyze gaze tracking,
engagement, and conversion rates
Sources: Metaverse series Part II
39
27
M O N E Y M E TAV E R S E
Metaverse mechanics
A metaverse VR world on Ethereum
Programmability /
scriptability
Program/develop personal experiences within the
Somnium universe
Monetize asset store or on property
Fully programmatic VR advertisement plug-in
Space monetization
Schulte Research
Long-term livability
Blockchain integration
Capture and analyze gaze tracking, engagement, and
conversion rates
Automated recording mode of avatars on properties
Enables AI-based analysis to bring avatars to life
Powered by Ethereum blockchain for transparency and
authenticity of transaction
Cross-platform
usability
All major VR headsets
Customizable PC
client
Create and manage
own layout setup for
quick and easy in-game
interactions
Social
Persistent social VR world
Ownership
Ownership of virtual land
Verification of ownership of digital assets
Sources: Metaverse series Part II
40
Technology stack
VR Headsets
Compatibliity with all major VR headsets, including Oculus,
HTC VIVE, HP, Valve, all Windows Mixed Reality headsets,
and others
Native builder
Most well-equipped/featured with respect to the desktop,
where included native assets enable users to build a widevariety of things as desired
In-house server
architecture
In-house server architecture enables thousands of users to
simultaneously interact in the same, persistent VR world
without the need for network sharding via sub-servers or
mirrored instances
Karma
Social status and how others perceive them in the
metaverse. Karma level is calculated through a
variety of factors:
Building activity on parcels
Schulte Research
Organization and participation in events
Total play time
World discovery rate
Land ownership
Active engagement in economic
activities/transactions
Unity-based SDK
Somnium supports the creation of bespoke, unique user
avatars via imports and a Unity-based SDK enabling highlevel of design flexibility
Ratings from other Somnium Space users
Sources: Metaverse series Part II
41
Partners of Somnium
-level specifications
Pimax
Somnium has partnered with Pimax
-based domain
Somnium has partnered with Sony via their state-of-the-art 3D model creation technology
In addition, Sony houses a VR-based store within the Somnium universe that is one of the first in the world
Somnium is a part of the specialized Microsoft for Startups program.
Schulte Research
Bring advertising revenue for users on the platform
platform transactions.
-two solution offers speed and near-zero transaction costs for Somnium users with respect to on-
Sources: Metaverse series Part II
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Paul Schulte
Partners of Somnium
OpenSea provides an accessibility, highly-liquid marketplace to empower these new economies, and offers tools that
permit developers to build such marketplaces for their digital assets
VR Education uses the Somnium space VR platform to enhance experiences and drive more education with respect to VR
adoption
Collaborative efforts towards constructing a truly decentralized and immersive metaverse
Schulte Research
Enabling teleportation between VR worlds
One of the most trusted and secure digital currency exchanges/custodians globally enabling customers to transact and
store digital assets
Sources: Metaverse series Part II
43
Economy in Somnium
Product/service offerings that allow platform users to generate revenue
Schulte Research
Characteristics
Economic activities
VR-based economies are unfettered by restrictions such as physics
and geography
Tokenizing and selling their productions directly via open
marketplaces
Applications involving blockchain and digital asset
Owning and monetizing broader digital assets within the Somnium
Economy
Safety, privacy, encryption, traceability, and verifiability of ownership
of digital items/asset transacted on platform via the network.
VR world navigable by thousands of users simultaneously
Users to maintain full ownership over their digital assets/possessions in
the form of NFTs.
Creation, building, and monetization of land
Sources: Metaverse series Part II
44
Developers
Collectors
NFT collectors exhibiting their collections on their land as
well trading amongst each other
Entrepreneurs
Entrepreneurs can build and sell digital/tangible goods
Traditional companies
Schulte Research
Developers selling tokenized digital assets and avatars
Game developers
Cornerstone principles
Sominium Economy
Somnium Space monetization and business
models
Tokenization of virtual land
Tokenization of digital
assets/experiences
Decentralized marketplaces
Traditional companies and businesses creating a store presence within the Somnium Space
Game developers inserting short/large demos or gaming experiences into the Somnium Space
Sources: Metaverse series Part II
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M O N E Y M E TAV E R S E
Somnium Space monetization and business
models
Content creators
Content creators can showcase a variety of virtual
experiences (e.g., vlogs, commentary, etc.) and monetize
them within the Somnium Space/platform
Universities
Universities and other higher-learning institutions building
courses and experiences such as an immersive
planetarium
Artists
Artists can showcase a variety of creations such as 2D/3D
paintings and sculptures
Native token of Somnium: Somnium CUBEs
CUBEs can be used for a broad array of product/service
offerings including:
interacting in entertainment (e.g., race cars)
Schulte Research
land purchases or renting
digital asset/item sales in the marketplace
eCommerce
Streamers
Streamers (e.g., Twitch, etc.) having their own virtual studio from which they can record within the Somnium Space
Unity SDK
Developers can build anything – for fees or otherwise – and upload it via the Somnium Unity SDK for other users to engage,
interact, and transact with
Sources: Metaverse series Part II
46
Investing, Buying & Renting Land
Brand new area of virtual real estate
Overview
Value of parcels
Each land parcel is unique, unreplicable, non-forgeable, and has verifiable
ownership.
The value of various parcels within the Somnium Space varies as a function
of factors: popularity of areas, the view of different areas, size, etc.
Owners of these NFT-based land parcels have direct autonomy over
contents that are built on top of their land parcels
The average land parcel in the Somnium Space across the different size
ranges sold for roughly 6.57 ETH, or equivalently US$14,560
Throughout the COVID-19 pandemic, as more users enter the Somnium
scarce digital real estate within the Somnium Space will continue to
increase in value.
Schulte Research
Metaverse Property: the first VR-based real estate company in the entire industry
Property Management
Renting property to clients, maintenance of
technical and visual aesthetic, collecting rents from
clients
Property Development
Architecting, designing, and developing the build, as well
as establishing on-map development
Consulting
Helping property owners/renters make important
decisions in VR-based real estate using their
knowledge of virtual land across metaverses
Marketing
Metaverse Property has strong access to the burgeoning
advertising network that exists across the various
metaverses
Sources: Metaverse series Part II
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30
Paul Schulte
Schulte Research
Section 3: Visa, PayPal, Square, and Mastercard in
the crypto space
48
Visa vs. Mastercard vs. PayPal vs. Square
Content/Section Title
Products
1.
2.
3.
4.
1.
Schulte Research
Geographies
Buy, hold, sell using Visa credentials
Cash-out to Visa credentials
Crypto APIs
Direct settlement in USDC
1.
2.
3.
2.
Visa network to facilitate access for
partners to crypto APIs and transaction
settlement
B2B Visa Connect for blockchain crossborder payments
Visa sees a global opportunity in crypto,
besides China, which is restricted by Union
Buy, hold, sell using Mastercard
credentials
Cash-out to Mastercard credentials
Crypto APIs
Looking for consumer protections, strict
compliance protocols with regulations, and
pure payment not as an investment in
potential crypto-assets
No direct exposure to crypto as Visa
enables partners to leverage crypto APIs
and access its network
Risk exposure
Customer segment
Through partnerships and collaboration
Issuance of Mastercard credit cards with
crypto-related rewards
Plans on rolling out stablecoins settlement
in 2021
Through partnerships and collaboration
Issuance of Visa credit cards with cryptorelated rewards
Involvement in stablecoins
Crypto approach
1.
2.
Mastercard network to facilitate access
for partners to blockchain APIs (smart
contracts, fast pay network in P2P, P2M,
and B2B)
Stablecoins settlement in 2021
Cryptocurrency trading and as a funding
source
Adds a lower cost of funding for PayPal
Supportive of users & engagement
1.
2.
Crypto Checkout: settled in fiat currency
Buy, hold, and sell Bitcoin, Bitcoin Cash,
Litecoin, and Ethereum
No Balance sheet exposure
Product exposures: benefits from buying
and selling via third-party Paxos. No
exposure to the volatility of underlying
crypto-assets
PayPal users – Retail consumers
Mastercard network
Launch in the US first
UK rollout in Q3 2021
Transactions settled in fiat currency only
89 blockchain patents granted, 285
pending
Acquisition CipherTrade for crypto analytics
Transactions are settled in fiat currency
No private key issued: impossible to transfer
crypto out of digital wallet
Cryptocurrency trading and as a funding
source
Buys and sell crypto directly from its
customers
1.
2.
Buy, hold, and sell Bitcoin
P2P transfers
Balance sheet: holds $220m in Bitcoin
Product exposures: benefits from buying
and selling of consumers without volatility
exposure. Square earns spread from buying
and selling
Square users – Retail consumers
Launch in the US
network
Other
Visa Research Team to improve scalability
and offline use of digital currencies
CryptoPunk
Plans crypto services integration in Brazil
Withdrawing to an external wallet possible
Plans for decentralized exchange
Sources: PayPal public filings, Capital IQ, Credit Suisse, CNBC, Wall Street Journal, Pymnts, Financial Times
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31
M O N E Y M E TAV E R S E
PayPal in the Crypto space
Schulte Research
Case Study
50
Case study 1 – PayPal in the crypto space
PayPal approach to crypto
Safe rollout on/off ramp to traditional crypto products in the US and in the UK
Crypto products: Crypto Checkout and PayPal Crypto
Products Overview
Crypto Checkout: Launch Q2 2021, cryptocurrency as a funding source to pay. Transactions settled with fiat currency1
Cryptocurrencies
Bitcoin, Bitcoin Cash, Ethereum, and Litecoin
International Expansion
Planned in H1 2021
Rationale
Adds a lower cost funding for PayPal. More supportive of users & engagement
Regulation
BitLicense from the NYState Department of Financial Services in Q4 2020
PayPal Crypto: ~2.5% take rate
Transaction fees
Schulte Research
PayPal Crypto: Buy, hold, and sell experience since Q3 2020 in the US on PayPal, Q2 2021 through Venmo
including variable fee based on the amount from 150bps to 230bps and a spread of ~50bps
Crypto Checkout: only spread on the conversion from crypto to US$
User engagement
Crypto users sign into the app twice as much as they did before buying crypto on PayPal
Cannot transfer crypto in and out of the wallet
Limitations
Limited crypto-assets available
Sources: PayPal public filings, Capital IQ, Credit Suisse, CNBC, Wall Street Journal, Pymnts, Financial Times
51
PayPal crypto investments
Indirect exposure to digital assets and blockchain-related companies via acquisitions, investments, and partnerships
Investments in the Crypto space
Company
Transaction
Details
Acquisition announced Q1 2021
Cloud-based wallet for storing and protecting digital assets using cryptography
Estimated ~$200 million
Bring secure-storage expertise
Private investment
Cryptocurrency tax software solutions for consumers and enterprises
Undisclosed amount
Serves regulatory agencies worldwide
Q1 2021
Partnership since Q3 2020
Powers
PayPal participated in Series C funding in Q4 2020
Crypto compliance and Risk Management
Private investment Q4 2019
Schulte Research
crypto service enabling US users to buy, hold, and sell crypto
APIs, market expertise, and regulatory framework
PayPal participated in Series D funding in Q2 2021
Anti-money laundering, prevent fraud, and compliance
Acquired by Blockchains Management in Q4 2020
Blockchain-based identity management and compliance software solutions for
financial institutions
Private investment in Q4 2019
Deal fell through Q4 2020
Crypto custody and trading firm
Estimated ~$750
Sources: PayPal public filings, Capital IQ, Credit Suisse, CNBC, Wall Street Journal, Pymnts, Financial Times
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32
Paul Schulte
Visa in the Crypto space
Schulte Research
Case Study
53
Case study 2 – Visa in the crypto space
Visa approach to Crypto
Crypto steps as partnerships instead of solo initiatives, with the aim to provide ecosystem infrastructure surrounding crypto
Late implication but significant impact in the crypto space
Created Zether1 & Fly Client2
Different approach than Square or PayPal, as in Visa takes crypto steps as
partnerships instead of solo initiatives
Team is now focused on new mechanisms to improve scalability and
enable offline digital currency transactions
Collaboration with the World Economic Forum on a set of policy
recommendations for central banks exploring CBDC
Offline use of CBDC transactions via Bluetooth or NFC to
expand financial inclusion by helping unbanked individuals
2016
2018
Announced B2B Connect with Chain Core,
enterprise blockchain infrastructure
Patent blockchain-based transaction system
Partnership BTL cross-border settlement
Schulte Research
Visa Research Team
Visa approach to crypto came later than its direct competitors
2020
Engagement with World Economic Forum
Circle joined Visa Fintech Fast Track
Settlement of USDC in fiat currency
Partnership IBM
Integration open source Hyperledger Fabric
Pilot phase B2B Connect in collaboration with
Commerce Bank, Shinhan Bank, Union Bank,
and United Overseas Bank
FIS integrated Visa B2B Connect
Commercial launch B2B Connect
Collaboration Infosys
Patent for digital fiat currency
2017
Settlement in USDC directly
Launch API Offerings for First Boulevard
Partnership with Tala for API Offerings
2019
2021
Sources: Visa public filings
(1) Zether is a privacy-preserving payment mechanism. JP Morgan Chase announced plans to integrate into its own blockchain efforts.
(2) FlyClient is a framework that makes it easier for mobile devices to validate blockchain transactions
54
Visa crypto and blockchain partnerships
Visa estimates that these partnerships could yield 50m+ new Visa credentials1
35 partnerships in the Crypto space2
Details
Details
Transactions settled in UDSC, stablecoin powered by Ethereum
Circle Visa Corporate Card to spend USDC
Improve process of interest disbursements and create new crypto
products
First Federally Chartered Digital Asset Bank
Powers Visa crypto-native settlement with USDC through APIs
Exclusive relationship with Visa2
World
Economic
Forum
Fiat lending with crypto collateral via Crypto.com Visa Card at 9.9%
interest. Up to 8% cashback on purchases
10 million users
Visa Cards
Visa engaged with policy makers and organizations to shape the
future of digital currencies
Visa provided set of policy recommendations for CBDC
USDC co-founded with Circle
Schulte Research
Rewards program of 4% in Stellar or 1% in Bitcoin
International B2B Payment Solution
technology since 2017
Visa
Innovation
Program
Partnership for development of new Fintech solutions powered by
blockchain technology for B2B and cross-border payments
Visa Fintech
Fast Track
Example Visa leveraging partnerships
Co-founded
Created USDC
Anchorage powers
Blockchain based solution for cross-border money transfer
Log sentinel: Secure audit trail solutions through blockchain
Mobile blockchain-based loyalty program
pay with Visa at over 70m+ merchants
Most crypto partnerships have been borne out of this program
Partnership
1st USDC-settled Card
Sources: Anchorage, Business Insider, Circle, Crypto.com, Coinbase, BlockFi, Fold, Binance, Xapo, Line, Visa public filings, Nasdaq, Centre, Paytm, Bitpanda, Lastbit, Coinzoom
(1) Table is non-exhaustive. 35 digital currency platforms and wallets. Alfred Kelly, Visa CEO at Q2 2021 Earnings Call on 27th April 2021
(2) Ryan McInerney, Visa President at KBW Fintech Payments Conference on 23rd February 2021
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33
M O N E Y M E TAV E R S E
Purchase
Schulte Research
APIs2
Settlement
Differentiated value: brand, capabilities, reputation, safety, security, and experience1
Working crypto exchanges and wallets to allow customers to cash-out onto a Visa credential
Opportunities in the cross-border B2B space
APIs to offer the ability to purchase, custody, and trade cryptocurrencies
Partnership with Anchorage to provide back-office infrastructure
Visa Key Partnerships
Cash-out
Wallets and exchanges to use Visa credentials to purchase cryptocurrencies
Settle in digital currency starting with USDC stablecoin
Potential for crypto settlements for their B2B Connect product
Sources: Visa public filings
(1) Alfred Kelly, Visa CEO at Goldman Sachs Technology & Internet Virtual Conference on 11th February 2021
etwork for the neobank and clients
s customers will have access to USDC for remittances
56
Stablecoins settlement and Anchorage
Coinbase, Visa, Circle, and Anchorage working together to bridge the gap for USDC adoption via settlement on Visa Card
Stablecoins
Visa started investing in stablecoins
20 months ago1
Anchorage partnership
backed 1:1 with fiat currencies
First federally chartered digital asset bank
over
Exclusive Visa digital currency settlement partner to provide back-office
infrastructure, such as custodial, security services, accounts tracking, etc.
Visa upgraded infrastructure to enable partners to settle in digital currency
starting with USDC stablecoin
Launched pilot of USDC settlement with Crypto.com Visa Card
Increased conversation with central banks about designing CBDCs2
Anchorage and Visa plan to expand to other partners soon
Visa sees potential for crypto settlements for their B2B Connect product3,
leveraging Circle partnership to enable payments with crypto wallets3
Besides Crypto.com Visa Card, USDC standard settlement process requires
partners to settle in a traditional fiat currency
Schulte Research
Share of Total Stablecoin Supply
Total Stablecoin supply in US$ bn
Sources: Visa public filings, Coin metrics
(1) Ryan McInerney, Visa President at KBW Fintech Payments Conference on 23rd February 2021
(2) Oliver Jenkyn, Visa Executive President at Morgan Stanley TMT Conference on 1st March 2021
(3) Vasant Prabhu, Visa CFO at Wolf Research Fintech Forum on 10th March 2021
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Paul Schulte
Schulte Research
Section 4: US corporate
58
Coinbase
Schulte Research
Case Study
59
Case study 3 – Coinbase
Company overview
Towards full-stack crypto platform, from trading crypto to providing services for DeFi, NFTs, cloud, lending, and derivatives
Business model
Go-to-market strategy
Easy-to-use platform for accessing the broader cryptoeconomy by
investing, spending, saving, earning, and using crypto
Retail: provides investments, storage, spending, earning, and use of crypto
assets
Build brand as trusted space
Institutions: provides hedge funds, money managers, and corporations a
one-stop-shop for accessing crypto markets through advanced trading
and custody technology
Focus Coinbase Cloud, equivalent to Amazon Web Services (AWS) for the
global cryptoeconomy
Ecosystem partners: provides developers, merchants, and asset issuers a
platform with technology and services that enables them to build
applications that leverage crypto protocols, participate in crypto networks,
and securely accept crypto as payments
Continuous development of new products and services to enhance value
for consumer and business partners
Since inception, c.US$3.4 bn in revenue, largely from transaction fees
earned from volume-based trades by retail users and institutions
Goals
Limitations
Create a one-stop shop for institutional investors and solve ecosystem
issues:
Due to a different standard of regulatory scrutiny, competitors:
1. Operate under less stringent local rules and regulations;
Lack distribution, trust and usability
2. Can more quickly adapt to trends;
Schulte Research
Availability of easy-to-use and scalable infrastructure
3. Support a greater number of crypto assets; and
Offset effects of any future fee pressure due to economies of scale
4. Develop new crypto-based products and services faster
Proprietary full-stack scalable infrastructure surrounding crypto (e.g.,
blockchain integrations, crypto compliance infrastructure, cybersecurity,
cryptography)
Reliant on crypto asset volatility
Uncertainty regarding regulatory framework globally
Sources: Coinbase public filings
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35
M O N E Y M E TAV E R S E
Future prospects, products, and services
8.8m Monthly Transacting Users, 9k institutions, and 160k ecosystem partners as of Q2 2021
New products and services developments
Coinbase direct listing implications
Coinbase Asset Hub to help asset issuers integrate tokens with Coinbase
Bitcoin-collateralized loan product and a staking product 6% APR for staked
ETH2
1. Public listings amongst crypto firms;
2. Greater legitimacy of crypto within global finance;
Coinbase Cloud powered by Bison Trails for new suite of cloud-based crypto
computing services (similar to AWS)
3. Bridging the gap between crypto and traditional investors;
4. Playing a pivotal role in
; and
Smart order router product for institutional investors, routing orders to the
exchange with the best pricing amongst 10 liquidity venues
5. Increasing the market capitalization of large crypto assets through
enhanced investor participation
Launch Crypto Council for Innovation in partnership with Fidelity, Paradigm,
and Square: help regulators, policy makers to understand crypto
Recent partnerships with PNC Bank, SpaceX, Tesla, Third Point, and
WisdomTree Investments
Outlook and future potential for growth
Non-fungible tokens (NFTs) represent unique opportunity to transform the
relationship between creators and consumers
Now offers reward across six tokens, including ETH2 staking
Launch Coinbase Card and Coinbase Prime brokerage
Schulte Research
Diversification revenue streams with addition of new products and services,
notably Coinbase Cloud
Acquired Skew for institutional data analytics
Future growth in nascent services for institutional investors such as Borrow &
Lend in addition to Trading and Custody
Crypto long-term prospects (i) crypto as an investment; (ii) as a financial
service with the rise of DeFi; and (iii) as an app platform such as NFT usage
Lending with Ethereum as collateral provided enough liquidity
Sources: Coinbase public filings
61
Quarterly catalysts 2021 earnings
Catalysts Q1 2021 earnings
Catalysts Q2 2021 earnings
Higher MTUs and elevated trading volumes per MTU
MTUs +44% QoQ to 8.8m
Addition 7 new assets for trading and 13 new assets for custody
High volatility with Bitcoin reaching c.US$64k in April followed by c.45% drop
to c.US$30k
Growth institutional trading customers and volume traded per institution
Assets on Platform c.US$180 bn, -19.3% QoQ
Growth institutional interest in Ethereum and other crypto assets for
commerce, payroll, and custom white label solutions
Elevated Trading Volume at c.US462 bn, +37.9% QoQ driving trading
revenue growth
Substantial growth Subscription and services revenue
Increase interest in stablecoins, added support for Tether
Top 10 free app on iOS and Android
Schulte Research
Outlook Q3/Q4 2021
Lower MTUs and
Lo
d ttotal
t l Trading
Tradi
Volume
Vol
in
i Q3 compared
d tto Q2
Meaningful growth institutional revenue in 2021 driven by transaction and
custody
Increase ARPU compared to historical US$34
45 per month
Sources: Coinbase public filings
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Paul Schulte
Silvergate
Schulte Research
Case Study
63
Case study 4 – Silvergate
Company overview
Cash management services for digital currency-related businesses on top of traditional banking products and services
Business model
Go-to-market strategy
Precise targets:
Traditional finance: Business checking, Business savings, Commercial real
estate, Cash management, Personal banking
Digital currency exchanges: advanced integration and support
services for well-established digital currency exchanges
Digital currency business:
Silvergate Exchange Network (SEN) enables digital currency realtime settlement in US$ between counterparties
Institutional investors: bank accounts, services, and support tailored
to the unique needs of digital currency investors
c.US$239.6 bn transaction volume in Q2 2021, +44% QoQ and
+968% YoY
Software developers: bank accounts, advanced APIs, and expert
support for digital currency developers
Fintech companies: bank accounts, services, and support designed
to meet the needs of Fintech companies
Exchanges tied into the SEN via an API, connecting SEN deposit
clients
Schulte Research
Goals
Limitations
Leading provider of innovative financial infrastructure solutions and services
for the growing digital currency industry
Growing competitive landscape from incumbents (e.g., JP Morgan
accepting Coinbase and Gemini as digital asset customers)
Develop and deploy fee-based solutions in connection with their digital
currency initiative
Regulations surrounding digital currencies, especially SEN Leverage (e.g.,
SEC threatened to sue Coinbase over lending product)
Expand solutions and collaborations with Fintech companies, Institutional
investors, Digital currency exchanges, and Software developers
Downturn in digital currencies market, volatility, and regulations intensifying
Requires frequent funding to increase loans provided (e.g., ATM equity
offering in Q2 2021, issuance preferred stock in Q3 2021)
On/off ramp network for institutional investors to access digital currencies
(stablecoins and legacy digital currencies)
Potential outflow due to nature of non-interest-bearing deposits
Exclusive minting and burning issuer of Diem US$ stablecoin
Sources: Silvergate public filings
64
SEN Leverage product
Access to capital through US$ loans collateralized by bitcoin
Provides credit
Enters into an
agreement with the
Bank to borrow US$ to
deposit at exchange
US$
leverage account on its
platform
EXCHANGE
EX
TRADER
ADER
Settlements
M
Maintains
order
book
Executes tradess
Moves assets
Holds assets
US$ & Bitcoin
Schulte Research
Exchange uses SEN to
Holds/moves
assets
(Collateral)
US$ & Bitcoin
Trading activity
SEN US$ Transfers
Sources: Silvergate public filings
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37
M O N E Y M E TAV E R S E
Silvergate Exchange Network framework
The SEN executes in virtually real-time what legacy solutions do in several hours to several days
SEN
virtually real-time execution
API enabled
Sell BTC
Institutional
investor
Buy BTC
24/7/365
Digital currency
exchange A
Digital currency
exchange A
Schulte Research
Legacy solutions
longer execution
Sell BTC
Institutional
investor
Institutional
investor
Buy BTC
Traditional bank
Digital currency
exchange A
Clearing bank
Traditional bank
Digital currency
exchange A
Institutional
investor
Sources: Silvergate public filings
66
Key metrics and consumers
Focus on expanding digital currency offering, especially via lending and continuous innovation in the digital asset space
Digital currency and other deposits
Key Customers
Data in US$ bn
Digital currenc y deposits
Other deposits
$11.4 bn
$7.0 bn
$5.2 bn
$1.7 bn
$2.3 bn
$1.5 bn
$2.1 bn
Q2 2020
Q3 2020
Loan composition
$5.0 bn
Q4 2020
$11.1 bn
$6.8 bn
Q1 2021
Q2 2021
c.12% of Total assets
1-4 Family Real
Estate, 9.7%
Schulte Research
SEN Leverage,
13.7%
Commercial Real
Estate & Other,
23.0%
US$1.5 bn
Yield: 4.46%
Mortgage
Warehouse, 53.6%
Sources: Silvergate public filings
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Paul Schulte
Sygnum
Schulte Research
Case Study
68
Case study 5 – Sygnum
approach to digital assets: custody as
first layer
Create series of global partnerships to launch a comprehensive suite of crypto products and services
Development
Institutional-grade security to invest in the digital asset economy
Launched institutional-grade access to DeFi in Q2 2021
Partners
Co-developed custody platform with Custodigit, a joint venture with Swisscom
Schulte Research
Competitors
Examples
cryptocurrencies
supported
Bitcoin
Aave
Ethereum
1inch
Ripple
ICP
Litecoin
Maker
Tezos
Uniswap
Sources: Sygnum public filings
69
Brokerage and trading: 2nd layer;
Lending: 3rd layer
3rd layer: lending
Schulte Research
2nd layer: brokerage
Extending to brokerage and trading for crypto, and lending via crypto-collateralized LTV
Brokerage and trading services for digital assets in a secure and seamless way
Brokerage
Trade BTC, ETH, XRP, XTZ, LTC, BCH, and DeFi tokens
Exchange from major fiat currencies (e.g., CHF, EUR, SGD, USD)
Functionalities
Investors
Flexible LTV
Settlement within Sygnum platform
Regulated European OTC options for BTC and ETH
Increase fiat liquidity against digital assets (e.g., Bitcoin, Ethereum, XRP, Litecoin, Bitcoin Cash, and Tezos)
Interest paid on actual drawings to dynamically adjust liquidity based on current needs
Flexible Loan-To-Value (LTV) to optimize interest rates charged on loan amount
Achieved through LTV of c.40%
Sources: Sygnum public filings
Sources
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M O N E Y M E TAV E R S E
Asset management and DeFi: 4th layer
Asset management
Focus on asset management: vehicle for digital asset and high net worth investors
Customer segment
Sygnum Platform
Winners Index ETP
First focus on digital asset investors, second for high-net-worth investors via ETP
Provides range asset management investment products including alpha-oriented multi-manager fund
Tracks index leading protocol tokens, dynamically weighted by real world adoption, tracking the network effect
of the investor, user, and developer communities
Fully collateralized and physically backed, beta exposure to blockchain protocols
Launched regulated banking services for DeFi tokens, first step in
ambition
Next focus on suite of DeFi yield-generating products and services across banking and asset management
offering
Finally, custom solutions for clients with selected DeFi partners
DeFi
Schulte Research
Platform DeFi
DeFi tokens
Aave, Aragon, Curve, Maker, Synthetix, Uniswap, 1inch Network, USDC, Bancor, Chainlink, Compound, Polygon
Sources: Sygnum public filings
Sources
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Tokenization of physical assets and Bank-tobank white-label as 5th and 6th layer
Tokenization of physical and digital assets and white-label for traditional financial intermediaries
Tokenization physical and digital assets, focus on equity shares next
Tokenization
For example, Digital Swiss Franc (DCHF), wine in collaboration with Fine Wine Capital, and Fillette au
Artemundi
by Picasso with
Primary market issuance platform
Desygnate
Digital securitization of assets on the blockchain
Increases efficiency of capital raising and automates corporate housekeeping processes
Secondary market trading venue
SygnEx
Access to Venture Capital, Mid Cap, Real Estate, and Arts & Collectibles
Schulte Research
Payment and settlement instant and direct with Digital CHF token
Provides regulated digital asset products and services through B2B banking and operational compliance services
Bank-to-bank activity
One-stop-shop modular suite of banking services including accounts, payments and custody, brokerage, tokenization,
lending, and asset management
Partners can broaden offering and access new client segment, with wallets segregated off balance sheet
Sources: Sygnum public filings
72
40
Paul Schulte
Circle
Schulte Research
Case Study
73
Case study 6 – Circle
Company overview
Organically building a global internet-native settlement infrastructure
Business model
Go-to-market strategy
Target customer base: FIG, institutional traders, crypto finance, digital
content, fintechs, blockchain startups, and commerce & marketplaces
Building internet-native settlement infrastructure to operate a suite of
financial services:
USDC: created and operates core market infrastructure of USDC in
partnership with Coinbase
Free Circle account is first point of entry for using USDC & Digital Currency
service customers
Transaction & Treasury Services (TTS): Accounts and API services
provide comprehensive suite of payments and treasury services
API services provides an attractive alternative for customers to build custom
payments, commerce and financial apps only available once a
registered free member
SeedInvest: crowdfunding platform evolving into a platform for
tokenization of private capital markets
Utilize internet-native settlement infrastructure connecting USDC rails to over
180 countries
Goals
Limitations
Open, connected, and interoperable financial system
Trust among users: Crypto is an early-stage technology, and with increasing
occurrence of fraudulent behaviour, many companies are hesitant to trust
the security of such technology
Payments that are frictionless, immediate, and free
Schulte Research
Borrowing and lending decisions embedded in autonomous software
Blockchain interoperability: tendency for organizations to develop own
blockchain systems that are disjoint from others. Creates a non-universal
standard that is difficult to integrate
Political risk: still no transparency on digital assets regulation in US and
Europe
Sources: Circle SPAC Investor Presentation
74
Demonstrative illustrations
CBDC a focal avenue for Circle
Coinbase & Circle linked together to create first stablecoin authorized on the network that powers Visa
Co-founded
Created USDC
Anchorage powers
Partnership
1st USDC-settled Card
Single point of entry account to utilize CBDC & Digital Currency services
Schulte Research
Free Circle Account acts as first entry
point
Add on services
API & Yield
Convert, Mint, Redeem
USDC
USDC Storage & Custody
API Services
Yield Services
Send & receive on-chain
payments free and easy
Open accounts from 180+
countries
Embed
E
b d Ci
Circle
cle payments,
nt
payouts, and account
capabilities into customs
apps
Earn interest on USDC lent
into collateralized
borrowing markets
Sources: Circle SPAC Investor Presentation
75
41
M O N E Y M E TAV E R S E
Bullish
Schulte Research
Case Study
76
Case study 7 – Bullish
Company overview
Highly speculative play at c.US$9 bn valuation
Strong management in the crypto space despite Block.One track record
Business model
Go-to-market strategy
Bullish Exchange: Beta Trading Interface generating revenues from trading
fees and margin revenues
Institutional: focusing on institutional investors, financial service corporates
and other corporates who produce, hold and/or manage crypto
Hybrid order book: AMM provides liquidity at prices calculated
deterministically based on the size of the liquidity pool and ratio of assets
Retail:
Advanced retail investors
Bullish Treasury: participates in liquidity pool to earn & add liquidity, create
barriers & competitive advantages, and create trust & alignment
VIP/Whales
Global strategy, but focusing on Asia
Combines benefits of traditional crypto exchanges with DeFi
Large liquidity pool: pricing less impacted by single trades
book depth at same price level of competitors
Goals
Bullish better
Limitations
Platform not operational yet, expected in H2 2021
Increase market integrity
c.US$9 bn valuation includes 142.0k BTC and 20.2 m EOS
and volatile
Generate high yield for investors
Schulte Research
highly speculative
Block.One disappointing track record with smart-contract platforms EOS
that raised c.US$4.1 billion via ICO in H1 2018
Power traders with liquidity
Eliminate hidden slippage costs
Sources: Bullish SPAC Investor Presentation
77
Exchange revenue model
Redesigned the exchange to benefit asset holders, enable traders, & increase market integrity
Generated from trading activity
attributed to margin trading and
interest received
Margin interest fees
Market making fees
Spot (Maker) fees: 10bp
spread
Net revenues
Charge 25% on all revenues
Traders
Generated from trading activity on the
G
hybrid order book
No taker fees
Share weighted
Liquidity
providers
Schulte Research
Bullish Treasury
Sources: Bullish SPAC Investor Presentation
78
42
Chapter 2:
Fintech and Blockchain
Section 1: Focus on the fintech firms only and compare the US and China. First, let’s
look at the large caps.
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players
NFT
Intellectual property
Crypto
Fintech
Property
Money
Insurance
Art/Wine/Sports
NFTs
Gaming
Rewards and incentives
China key players
Insurtech
Proptech
Risks
Schulte Research
Monopoly behavior
Antitrust hindering
development
Railroads Required
Blockchain (e.g., BSN)
Central Bank Digital Currency
Incentives to develop
proprietary technology
Fragmented data
Public trust
Sources: Schulte Research
80
Figure 47
Who can safely and quickly create a super app (while pleasing regulators) to
incorporate fintech, insurtech, proptech, and crypto to bring a rapidly digitizing
physical world to a whole new level via ecosystems of non-fungible tokens, which
are liquid, tradable, and legal? And which can connect to CBDCs in the coming 2-3
years? See Figure 47 for an illustration that we think explains where this is all going
(Alibaba was closest to this until Jack Ma’s waxen wings melted as he approached
the sun).
43
M O N E Y M E TAV E R S E
We conclude that PayPal and Visa are the two most plugged in, adaptive, and capable of gaining acquisitions and partnerships to achieve this target in the US. Square
is also a likely candidate, but it is among the most expensive stocks in the world. Mastercard also has exceptional capabilities, but Visa always seems to be ahead.
Consumer and Merchants ecosystem
Business lines
Payments
Checkout
Payment Processing
Charitable
Giving
P2P
QR Code
Checkout
Merchant Services
Schulte Research
Debit Card
Check
Cashing
Direct Deposit
Goals
Remittances
Business Debit
Card
PayPal
Working
Capital
Transactional
Credit
Buy Now, Pay
Later
Credit Card
Crypto
Buy/Hold/Sell
Money Pools
Consumer
Financing
Risk Services
Shopper
Insights
Dynamic
Banners
Shopping Tools
Droplist
Price Tracking
Business Loans
Point of Sale
Inventory
Management
Payouts
Invoicing
QR Code
Merchants
Consumer
Financial Services
Deals and
Offers
Unbranded
Processing
Marketing Tools
Rewards
Deals Engine
Store Cash
Business
Profiles
Sources: PayPal public filings
95
Figure 48
Consumer and Merchants ecosystem
PayPal objectives for Merchants and Consumers centred around a single platform
Schulte Research
Merchants
Consumers
Power all aspects of digital
checkout online, on mobile, and in
store
Provide solutions to help people
manage and move money both
domestically and internationally
Offer access to seamless credit
solutions to enable growth
Offer credit services that are
accessible and cost effective
Help identify fraud and improve risk
management
Facilitate simple, secure payments
across devices
Offer tools and insights to attract
new customers and increase sales
Deliver flexibility with payment
options globally, across platforms
and merchants
Sources: PayPal public filings
96
Figure 49
PayPal is giving birth to a super app whose algorithms resemble the exceptional
abilities of Alibaba five years ago. It is getting there (see Figure 48 and Figure 49).
44
Paul Schulte
Multi-sided platform
Foundations
Value-added services
New flows
Issuer & Consumer Solutions
Technology
Consumer
Payments
Merchant & Acquirer Solutions
P2P
G2C
Core Business
Security
Schulte Research
Brand
Credit Debit
Prepaid
Global ATM
Fraud Management &
Security Services
B2b
B2C
Data Solutions
Visa Consulting & Analytics
Talent
B2B
Sources: Visa public filings
99
Figure 50
Visa is outstanding at creating partnerships that can leverage Visa’s platform to enter any B2B or B2C business line. Figure 50 shows the powerful places where Visa can
go that few firms in the US can go simultaneously, reinforcing circles of overlapping
data. These include government to consumer; logistics for SMEs; B2B, B2C; and P2P.
Visa is rapidly entering the tokenization of digitized data. And Visa is a natural digital
rail if the Fed wants to launch a digital coin.
Company Overview
Business model
Go-to-market strategy
Frictionless Seller ecosystem, enabling cross-selling / up-selling financial
services and products including loans
Square Seller end-to-end solution for merchants (i.e., Hardware, software,
data analytics, payments, financing)
Cash App ex-Bitcoin revenue at US$605.9 m (+86.5%) in Q2 2021
Square for Restaurants and Square for Retail key POS software verticals,
offering all-in-one POS systems
Seller Ecosystem revenue at US$1.4 bn (+86.7%) in Q2 2021
Square Cash App P2P transactions expanding into super app (i.e., full suite
financial services)
Global expansion underway across key markets (e.g., UK, Europe, Australia,
Japan)
7 m weekly Cash Card actives
Revenue generated from transaction fees (merchants) or value-added
services (e.g., trading, instant deposits)
Goals
Limitations
Expand SMEs financing (Square Bank launched Q1 2021), facilitated 136 k
loans for US$923 m in Q1 2021, +68% YoY
Increasing credit risk from SMEs financing and BNPL following
acquisition
Schulte Research
Super app potential with Cash App (e.g., BNPL following Afterpay
acquisition, enhance crypto offering)
Direct exposure to bitcoin volatility, holding US$220 m on BS
Competitive landscape from incumbents with similar products (e.g., iZettle
and Venmo by PayPal)
Square Financial Services Bank in Q1 2021, suite financial products for SMEs
Embark merchants with US$125
>US$500 k
500 k in GPV and larger sellers with
c.7.4% ex-Bitcoin revenue from International
Sources: Square public filings, Financial Times, Wall Street Journal, Credit Suisse
104
Figure 51
45
M O N E Y M E TAV E R S E
Funding since inception
Valued at c.US$2.9 bn at IPO, Square is approaching US$130 bn market cap in 2021
Amount raised, lead investors, and post-money valuation
IPO: US$243 m raised at a US$2.9 bn valuation, now approaching US$130 bn
Investor base: Vanguard, BlackRock, Morgan Stanley, and FMR LLC as top institutional holders
Post-money valuation
Amount raised
$10m
$32m
$100m
$200m
$150m
$243m
6-Nov-09
5-Jan-11
29-Jun-11
17-Sep-12
6-Oct-14
19-Nov-15
$6,000m
Schulte Research
$3,250m
$2,900m
$1,600m
$45m
$240m
Series A
Series B
Series C
Series D
Series E
IPO
Sources: CB Insights, Crunchbase Pro
105
Figure 52
Square dual-sided platform
High cross-selling / up-selling potential with dual-sided platform merging merchants and consumers
Seller Ecosystem
Cash App Ecosystem
POINT OF SALE
P2P
HARDWARE
PAYROLL
DIRECT DEPOSIT
ONLINE
CROSS-BORDER
MANAGED
PAYMENTS
Schulte Research
CASH CARD
TEAM
MANAGEMENT
Sources: Square public filings
BITCOIN
CUSTOMER
RELATIONSHIP
MANAGEMENT
DEVELOPER
PLATFORM
BOOST
BUSINESS
BANKING
STOCKS
106
Figure 53
Mastercard is similar but seems to be behind Visa. Square’s buildout is on Figure
51, Figure 52, and Figure 53 and is fascinating — it is going in the same direction but
brings echoes of Cisco or IBM. PayPal makes more sense.
46
Paul Schulte
Section 2: Fintech small caps. Prefer Marqeta for technical reasons.
Company Overview
Blue Ocean B2B solution allowing flexible and quick go-to-market access for companies
Business model
Go-to-market strategy
Focused on new channels of card issuance vs. traditional banks
Tailored cloud-based open API platform delivers card issuing and
transaction processing services
Usage-based model based on processing volume
Enables any company or brand to issue card across a wide range of use
cases
Majority revenue from Interchange Fees generated by card transactions
Offers flexible and reliable on-demand service for modern card issuance
Substantial product & technology hiring to improve and expand products
and services offering
Backend-as-a-Service becoming the option of choice for costeffectiveness and go-to-market speed
Focused around single solution for best performance instead of end-to-end
solution
B2B customers: employers, on-demand platforms, challenger banks, core
payments & P2P platforms, Fintech issuers, brands
Schulte Research
Goals
Limitations
Diversify revenue streams by increasing transaction volumes with recent
partnerships (e.g., Marcus by Goldman Sachs)
Revenue highly dependent on Square, generating 60% and 70% in FY2019
and FY2020 respectively
Targeted sales strategies to act as both Program Manager and Issuer
Processor
Increasing competitive landscape from emerging issuers such as Adyen
and Stripe
Focused on improving current specialization instead of providing end-toend solution
Revenue streams dependent on Marqeta acting as Program Manager
revenues are more lucrative since Marqeta earns interchange fees and
processing fees
Risk consumers such as Square develop technology in-house
Sources: Marqeta public filings, FT Partners, Credit Suisse, Financeit
110
Figure 54
Funding since inception
Prominent investor base, including Visa and IconIQ as lead investors
Amount raised, lead investors, and post-money valuation
IPO: raised US$1,228 m at higher price of US$27 rather than initial price range of US$20
Post-money valuation
24
Amount raised
$6m
$14m
$25m
$25m
$45m
$260m
$150m
$1,228m
16-Jun-11
15-Mar-13
27-Apr-15
26-Jul-17
5-Jun-18
21-May-19
28-May-20
9-Jun-21
Schulte Research
$14,317m
$4,300m
$9m
$64m
$87m
$414m
$500m
Series A
Series B
Series C
Series D
Series D-II
$2,000m
Series E
Series E-II
IPO
Sources: CB Insights, Crunchbase Pro
111
Figure 55
47
M O N E Y M E TAV E R S E
Modern card issuance framework
Issuing Bank1
Issuer
Processor
Program
Manager
Schulte Research
Payment Network Providers
Non-bank
Issuer
Roles and key players in Modern Card Issuance
!
Owns the cardholder relationship
!
Marketing and/or distribution of cards
!
Holds bank license
!
Final approval on account creation
!
Minimal role
!
Routing of card transactions for approval
!
Account number & card generation
!
Offer APIs to developers
!
Oversees P&L of program, along with fraud and compliance
!
Maintains relationship with issuing bank and card networks
(1) Bank Partners used by FinTechs are typically exempt from Durbin debit interchange caps. Institutions with assets of less than $10 billion are exempts from interchange fee
112
Figure 56
Interchange Fee Regulations
High interchange fee in the US; Potential limits to international expansion
US average debit card interchange fee in 2019
Interchange take rate estimates
0.94%
Covered transactions: purchase transactions covered by interchange fee standard
Exempt Transactions: purchase transactions exempt from the interchange fee standard
Single -message interchange fee average
0.64%
0.69%
0.24%
0.19%
0.03%
Dual-message interchange fee average
0.54%
Square
rre
Source: Federal Reserve Regulation II (Debit Card Interchange Fees and Routing)
Marq
Marqeta
rrq eta
Sutton
Sutto
tto n Bank
Source: Federal Reserve Regulation II (Debit Card Interchange Fees and Routing); Marqeta S1
(1) Square used as a figurative example
(2) Square estimated based on exempt transactions dual-message interchange fee less fees
incurred by Card Networks, Marqeta, and Issuing Bank
(3) Card Networks, Marqeta, and Issuing Bank fees estimated based on net revenue from
Interchange and Processing fees and Costs of Revenue from Card Network and Issuing Bank
Durbin Amendment to the Dodd-Frank Act provides that Interchange Fees
that an issuing Bank or Card Network receives for debit transactions are
regulated by the Federal Reserve. Marqeta only contract with Issuing Banks
(Sutton Bank), who are exempt from the Durbin Amendment, to access
higher interchange rates
Schulte Research
Card
rrd Net
Network
t wor
1.41%
Interchange caps in Europe on credit (0.3%) and debit (0.2%)1, potentially
Federal Reserve proposing changes to Regulation II2 that would require
merchants have a choice in how online transactions are routed. Potentially
reduce interchange fee as merchants would be able to route their
transactions across Visa, Mastercard or smaller debit networks with lower
fees
Sources: Marqeta, Federal Reserve, Credit Suisse
(1) Interchange Fee Regulation 2015 and 2016
(2) May 7 2021: Federal Reserve Board invites public comment on proposed changes to Regulation II regarding network availability for card-not-present debit card transactions
113
Figure 57
Marqeta has a lot going for it. It is dependent on Square for much of its business –
Figure 54 to Figure 57.
48
Paul Schulte
Company Overview
Strong tailwinds with Galileo and conditional approval on Bank charter
Business model
Go-to-market strategy
Business lines: Borrow, Invest, Spend, Protect, and Business
Targets Highly Educated Not Rich Yet (HENRY) consumers notably student
debt lending and refinancing
Heavily relies on technology base for Lending to develop new products and
services
Focus shifting to High Earners Not Well Served (HENWS) consumers
Galileo provides API and payments platform powering the infrastructure of
SoFi and white label for card issuing and digital banking (e.g., Chime,
Monzo, Robinhood, Wise)
Cross-selling by offering diverse product portfolio at a one-stop-shop
Q1 2021 revenue of US$220.6 m (up 159.9% YoY) from Lending (76.2%
growing 105.5% YoY), Tech platform Galileo (20.9% up 46.2x YoY), and
Financial Services (2.9% up 200.0% YoY)
Capture share from traditional financial institutions
Limitations
Schulte Research
Goals
Widening comprehensive suite of products aiming to gain further market
share from single point solution providers
Risk of being overtaken by more agile competitors on innovation, brand
awareness, etc. (e.g., well-funded legacy banks, digital banks)
Aim to own entire technology stack by benefitting from developing inhouse to reach scalability, capitalising on the acquisition of Galileo
Unprofitable business with US($44.6) m in Adjusted EBITDA, expecting to
reach Adj. EBITDA profitability in 2021E of US$27 m
Preliminary approval for national bank charter (Q4 2020), plans to acquire
community bank to accelerate process
Lack of bank charter impacting access to lower cost of capital and
increasing lending capabilities
Fragmented nature of financial products and services landscape in the US
present opportunity for consolidation, with significant economies of scale
potential
Management projects cumulative incremental EBITDA gain from
bank charter of US$1,005 m until 2025E)
Sources: SoFi, Forbes, Seeking Alpha, Credit Suisse
115
Figure 58
Funding since inception
SoftBank-backed prominent one-stop shop in the US
Amount raised, lead investors, and post-money valuation
SPAC: raised US$2.4 bn at a US$8.7 bn valuation, including US$1,225 m from PIPE and US$370 m from T. Rowe
Softbank, SilverLake, and Qatar Investment Authority as Lead investors
Post-money valuation
Amount raised
$2m
$77m
$30m
$80m
$200m
$1,000m
$150m
$500m
$500m
$2,400m
8-Sep-11
11-Sep-12
2-Oct-13
3-Apr-14
3-Feb-15
19-Aug-15
27-Oct-15
24-Feb-17
29-May-19
1-Jun-21
$8,650m
$4,300m
Schulte Research
$4,000m
$4,800m
$3,065m
$7m
$195m
$87m
$413m
Series A
Series B
Series C
Series C-II
$1,300m
Series D
Series E
Series E-II
Series F
Series G
SPAC (completed)
Sources: CB Insights, Crunchbase Pro
116
Figure 59
49
M O N E Y M E TAV E R S E
One-stop shop for financial services
SoFi diversification to full play financial services
Student Loan Refinancing
Borrow
Private Student Loans
Personal Loans
Home Loans
Active Investing
Invest
Automated Investing
Retirement Accounts
Crypto
Home/Auto Insurance
Protect
Life Insurance
Real Estate Planning
Business
SoFi at Work
Schulte Research
Small Business Financing
Spend
SoFi Credit Card
Bank accounts
Sources: SoFi, Forbes, Seeking Alpha, Credit Suisse
117
Figure 60
SoFi’s significant X factor is Galileo as a payment processing platform. The API
provides card issuing, virtual card solutions and powers digital banking infrastructure.
Overall, we are skeptical – Figure 58 to Figure 60.
Section 3: Patterns emerging in China: did China suddenly wake up in the middle
of a pandemic raging in Asia, as well as a much-needed economic recovery and start
worrying about data security, education, wages, tutorial services, and adolescent gaming all at the same time?
What is common about the industries that the PRC government is targeting?
Nothing. What is common about the charges against the companies? Nothing.
Are these companies antagonistic toward the state? Except for Alibaba, no! Are
they in a particular region that is a gadfly for the center? No. Are they part of the
Shanghai mafia? No. So, talking about the 5-year programs and saying, “well,
there were concerns about education or tutoring or ‘too much gaming’ or data
breaches in the 5-year plan, so we should have known better” is rubbish. These
50
Paul Schulte
narratives are noise and miss the point. Should we conclude that a government
that is very busy trying to jump-start a $14 trillion economy and keep a dangerous virus at bay is suddenly interested in adolescent stress from after-school tutoring or driver data from Didi? Or wages at Meituan? Come on. We are looking
in the wrong place.
Tencent
Schulte Research
Case Study
139
Figure 61
Company Overview
Value-added propositions in B2B and B2C in Fintech
Business model
Go-to-market strategy
Key verticals: Gaming (#1 Global game operator by revenue on mobile
and PC), Fintech & Business, and Social Media (QQ, WeChat)
Minimize expenses across value chain through automation and low-price
value-added proposition
Most popular instant messaging platforms (QQ), and social mobile app
(WeChat). Revenue from digital advertising, digital content subscriptions,
and membership privileges
Value-added proposition:
Mobile payments for end-users with WePay
B2B-focused in online advertising and financial services
Tencent Games with internal development studios, investments in external
companies globally, and partnerships
B2C-focused in financial services, games, and social networks
Fintech (B2B and B2C): payments, wealth management, lending, insurance
Increased focus in Fintech services, greater transaction costs as TPV grows
Increased spending on Cloud Services business to enlarge scale
Limitations
Goals
BNPL access with Fenfu and repayment through WeChat
Anti-trust investigations due to Tencent potential position as a monopoly
(e.g., Tencent only offering their own payments systems instead of
competitors such as Alipay)
Schulte Research
Dive deeper into financial products for SMEs (c.90% businesses in China),
especially lending capabilities and supply chain financing with Linklogis
(c.15% equity stake post-IPO)
Chinese regulations on Big Tech
WeBank expanded credit to SMEs, leveraging massive user bases to bring
financial institutions on board
Tencent finance-related businesses ordered to restructure as a new
Financial Holding Company
Flywheel effect by leveraging existing payment app to encourage existing
customer base across all verticals
Sources: Tencent public filings, PBOC
140
Figure 62
51
M O N E Y M E TAV E R S E
Diversified revenue streams
Fintech and Business Services growing at a fast pace, benefitting from flywheel effects of other key verticals
Revenue from Business Segment1
Data in
bn
Segment
2%
5-year CAGR 33%
1%
Fintech and Business services
28%
27%
Transaction-based revenue
Enterprise and consumers
E
Payments, Wealth management, Fintech services
Cloud and other enterprise services
2%
2%
27%
Online advertising
17%
17%
Traffic-based revenue
Enterprise
E
Social: WePay, QQ, app store, browser, etc.
Media: news, video and music, etc.
23%
18%
18%
19%
Schulte Research
17%
11%
18%
41%
33%
47%
24%
2016
VAS: Games
32%
32%
23%
22%
2020
LTM 2021
Fee-based revenue
30%
24%
23%
23%
2017
2018
2019
VAS: Social networks
Fee-based revenue
Consumers
C
Mobile games
PC games
Console games
Consumers
C
Digital content subscriptions
Membership privileges
Virtual item sales
Sources: Tencent public filings
(1) Others include Fintech and Business services for FY2016 and FY2017
141
Figure 63
Fintech and Business services verticals
WeChat Pay and Alipay dominating micro-payments in China
Payment Solutions
Other Fintech services
LiCaiTong
Wealth management services including compliant and inclusive
financial products
Insurance services
c.1 bn average daily commercial payment transactions since Q4 2019
WeSure
Take rate from merchants for commercial transactions
Small-sized and maturity consumer loans
Social and other transactions including red packets, bill sharing, and utility
payment
WeiLiDai
Cloud Services
Distribution fees from WeBank with no credit risk or BS exposure
Other Business services
Tailored smart industry solutions to transform businesses to digital across all
major verticals
Schulte Research
Tencent Cloud
WeCom
Tencent Meeting
IaaS, PaaS, SaaS, and technology solutions for enterprises
Smart Retail
Smart Healthcare
Smart Transportation
Smart Education
IaaS: Star Lake server and T-block technology enhance service
PaaS: Security and real-time communication PaaS
SaaS: Tencent Meeting, WeCom, Tencent Docs for digitalisation
Sources: Tencent public filings
142
Figure 64
52
Paul Schulte
Tencent Cloud & Fintech sub-verticals
Investments in Blockchain, Cloud infrastructure, and AI paying off across Fintech sub-verticals
Technological capabilities
Fintech sub-verticals
Connecting industries, consumers, and business partners
Smart industry solutions leveraging Tencent Cloud infrastructure, proprietary technologies to assist
businesses achieve digital transformation
Leverages blockchain, AI, big data, cloud
computing, and edge computing capabilities to
power proprietary technologies across all Fintech
sub-verticals
Payments: Weixin Pay, QQ wallet, Transit QR
code
Smart Solutions
Retail
Software and
Services
Healthcare
WeCom
Meeting
Education
Docs
Transportation
Weixin
Weixin Pay
Wealth Management: LiCaiTong offers
financial products (e.g., money market fund,
investment-linked products, overseas
investment funds)
Finance
Trading platforms: Tencent Portfolio provide
users real-time market information
Security
Tax refund: WeTax Refund
B2B Payments: Business Tenpay offers secure,
compliant, and flexible corporate account
management system for eCommerce
platforms
Technologies
Schulte Research
Security
Autonomous driving YouTu AI Lab
AI Lab
Big Data
Location services
Range products & services (>300) on top of computing and storage
Infrastructure in 27 regions and 62 availability zones as of Q1 2021
c.1m+ paying customers since Q4 2019
Infrastructure
Sources: Tencent p
public
blic filings
143
Figure 65
AI, Machine learning, Big data, Blockchain
AI operating across all Tencent current and future verticals, continuously innovating (e.g., Big Data Tiangong)
AI & Machine learning
Big data and Blockchain
Artificial Intelligence Labs in 2016
Tencent blockchain applied to e-receipt, supply chain finance (equity stake
in Linklogis), judicial evidence management, etc.
Deep focus on machine learning, speech recognition, natural language
processing, and computer vision
Big data to target right audience accurately:
Ambition to help China become a leader in personalized medicine using AI
Integrate intelligent data management platform combining internal
and external data
Aim to integrate medical institutions with WeChat:
Provide advertisers with diversified, open, and safe communication
service platform
Book appointments online
Accept payments
Train AI algorithms with consumer data from these services
Partnership with Babylon Health, consumers access virtual
healthcare assistant
Platform launched in April 2021
Mying healthcare platform launched in 2017 to help diagnose cancer,
analyse, and manage healthcare records
Self-developed 4th generation fusion computing platform
Big data and AI basic operators, unifying metadata for execution
optimization, batch unification, stream, and graph computing
Schulte Research
Global investments on AI equity deals, notably in the US
Unify computing and compiling engine
trillions of data analysis
Sources: Tencent public filings, INF, Pandadaily, Bernard Marr & Co.
144
Figure 66
53
M O N E Y M E TAV E R S E
Ant Group
Schulte Research
Case Study
145
Figure 67
Company Overview
-payment for SMEs and consumers
Business model
consumers and merchants
Go-to-market strategy
Drive user engagement and expand user base through Alipay to propel
flywheel effect across Food and Beverage, Mobility, Entertainment, and
Healthcare & Municipal verticals
delivering micro-payments between
Develop comprehensive digital payment, finance, and daily life services
beyond China
Build value and maintain open platform with partners (i.e., Financial
institutions, Merchants, Service providers)
Constant product innovation to anticipate consumer and business needs
and deliver differentiated products and services
Refocus on core business following regulatory backlash
Focus on SMEs financing and helping them grow their businesses on a
global scale
Goals
Limitations
Technology innovation, especially blockchain:
Regulatory backlash following IPO
Build and upgrade digital infrastructure for new services
Forced to share Credit Data with SOEs, as a joint-venture with state-owned
enterprises in Q3 2021
Schulte Research
Improve understanding of customers and enable partners
Establish Ant Group as Financial Holding company, separating Jiebei and
Huabei as separate consumer finance company
Expand applications of AntChain
Continue digitalization of assets on AntChain
SMEs and consumers
Enable circulation of digitalized assets on a wider scale
, focusing on micro-payment for
Hold increasing amount of capital to offer loans, with commercial banks
limited to hold no more than 70% of capital when providing loans
Expand cross-border payment and merchant services by serving more
users, enabling more merchants, and broaden service offerings
Sources: Ant public filings, Schulte Research
146
Figure 68
54
Paul Schulte
Ant Ecosystem
Schulte Research
Alibaba entity
Chinese equivalent
West equivalent
Sources: Alibaba public filings, Quartz, Schulte Research
147
Figure 69
Alibaba Ecosystem, directly or via investments
Schulte Research
Alibaba entity
Key vertical
West equivalent
Alibaba entity
Key vertical
Online payments
Mobile messaging
Cloud services
Car service, ride sharing
Mobile apps
C2C e-Commerce
Mobile OS
Online travel booking
Maps and navigation
B2C e-Commerce
Retail outlets
E-learning
Group buying
Microblogging
Cloud storage
Streaming video
West equivalent
Sources: Alibaba public filings, Quartz, Schulte Research
148
Figure 70
55
M O N E Y M E TAV E R S E
Business and size
Summary size and scope of Ant Group
1,000+ m
80+ m
Alipay app
Alipay app
Annual Active Users
Monthly Active Merchants
711 m
729 m
Alipay app
Alipay app
Monthly Active Users
Digital Finance Annual Active Users
2,000+
200+
Partner Financial Institutions
Alipay app
Countries and Regions with Online Payment Services
118 tn
1.7 / 0.4 tn
Schulte Research
Digital Payments
CreditTech
Total Payment Volume in Mainland China
Consumer / SME Credit Balance
4.1 tn
52 bn
InvestmentTech
InsurTech
Assets Under Management
Sources: Ant public filings
Insurance Premiums and Contributions
Data as of 30th June 2020
149
Figure 71
Ant Cloud
Fintech & Smart Banking
Fintech of Ant & core products
Smart banking
Ant Cloud 100% owned by Ant Financial
Smart Banking service provides:
Intelligent customer service
Marketing
Big data risk control
Product and channel operation
Improve user experience
Improve operational efficiency
Reduce operating costs
Ali Cloud 100% owned by Alibaba
Close relationship: Many Ant Cloud products can be found in Ali Cloud
For life cycle of application, fintech will focus on: Financial intelligence,
financial security, financial distributed architecture, mobile development,
blockchain and financial distributed database
Advantages
Several core products:
SOFAStack
Advanced Risk Control
Fi
Financial
i l distributed
distrib t d architecture,
hit cture
t
providing
idi
project
p j t managementt and
nd
monitoring allowing for remote disaster recovery and low cost expansion
Integrates
t
t iinternal
t
l and
nd external
t
l
data,
Builds unified financial-level
intelligent risk platform,
mPaaS
Schulte Research
Financial-grade mobile development
opment platform
platf
providing cloud-to-endone-stop solution for App development, testing, operation & maintenance
Realizing comprehensive risk
management such as:
Marketing protection
Account protection
Transaction protection
Credit protection
Channel protection
Content protection
OceanBase
Financial-grade
i
i
distributed
is ri
relational
i
database developed by Ant
databa
Financial and Alibaba with online horizontal expansion capabilities
Sources: Ant public filings
Advanced Marketing
Build
il an online
li
and flexible
f i
marketing management platform
for financial institutions, including:
Customer insight
Event management
Channel push
Targeted delivery
Process automation
Marketing effect analysis
Marketing experiment
Event marketing
Creative center
Data as of 30th June 2020
150
Figure 72
56
Paul Schulte
Figure 73
Schulte Research
Participate in all parts of life
Sources: Ant public filings
152
Figure 74
57
M O N E Y M E TAV E R S E
How to get a loan in 3 seconds
Schulte Research
Credit line approval, drawdown, and repayment process
Sources: Ant public filings. Schulte Research
153
Figure 75
SME Credit risk management
Schulte Research
Process for SME lending
Sources: Ant public filings. Schulte Research
154
Figure 76
58
Paul Schulte
Services for partner Asset managers & Insurers
Value-added services powering asset management and insurance partners
Infrastructure for asset management
Ant leverages customer insights and massive
user base to enable partner asset managers:
To distribute simple, low-investment threshold,
and easy-to-understand investment products
for customers
Partner Asset Managers
Product Design
Product
Screening
Partner Asset Managers
Customer
Acquisition /
Education
Investment
Advisory
Interactive
Communication
Product Delivery
Infrastructure for insurance
Ant leverages deep customer insights, risk
management solutions, and technology to
enable partner issuers to:
+ Partner Insurers
Schulte Research
1. Acquire customers at scale and at low cost
Partner Insurers
2. Co-innovate products
3. Improve underwriting capabilities through
enhanced customer selection and pricing
Customer
Education /
Acquisition
Product Design
Underwriting
(Customer
Selection)
Claim
Solvency
Requirement
Product Delivery
4. Improve claims management through service
automation and fraud detection systems
Sources: Ant public filings. Schulte Research
155
Figure 77
Global Partnership & Investments
Independent
3rd
party credit agency under Ant Financial that uses cloud computing & machine learning
List of global partnerships & investments1
US
Delta Air Lines
EyeVerify
First Data
Marriott international
Stripe
Uber
United Airlines
V-Key
VeriFone Systems
UK & Ireland
InterContinental Hotels Group
Premier Tax Free
Schulte Research
Germany & France
Ingenico Group
PrestaShop
Worldline
Concardis
Wirecard
Singapore, India & Thailand
Alpha Payments Cloud
Grab
Resorts World Sentosa
Paytm
Ascend Money
Paysbuy
Sources: Ant public filings Data as of 30th June 2020
(1) Please note that words highlighted in blue indicate a partnership & words highlighted in orange indicate an investment
South Korea & Japan
Bankware Global
Orix
156
Figure 78
There is one commonality of all the investigations. First, they are ALL political
and mostly come from the CAC, which reports to the Vice Premier who reports to
the Premier. They come from the very top. Second, they are aimed at PRC companies that foreigners heavily own. Third, they all contain the most valuable resource in
the world: data. And we conclude that this vital national commodity (no longer oil,
gold, diamonds, or uranium) is digitized personal and credit data. This is now being
nationalized. The value of this data is being taken away from foreign investors in HK
59
M O N E Y M E TAV E R S E
and the US and being nationalized by the state. At the very least, this vital commodity
is being restricted to domestic ownership. That is why the stock prices in HK and NY
are falling. The trend is likely to continue. Our research on Tencent and Alibaba can
be found in Figure 61 to Figure 78.
Who is likely to remain untouched? Companies that stay in line with national
priorities will thrive.
•
•
•
•
Global cell phone and cell phone tower connections for innovative city
initiatives like Huawei.
Semiconductor producers will be revalued as the consumer fintech is
devalued.
Those who are genuinely involved in SOE reform like Ping An. Ping
An has embraced China Life to rehabilitate it, and it is at the center of
another national priority – healthcare.
Environment/climate change initiatives to clean up China’s air, land,
and sea.
As for companies in gaming, consumer eCommerce, tutoring, food delivery, and
self-interested data collection, value is emerging. But it will be decided by the state.
Watch for bottom fishing by entities like CIC. They are the ultimate insiders, for they
will be told when to buy.
60
Paul Schulte
Section 4: Additional research in PowerPoint format.
Schulte Research
Chapter II: Fintech and Blockchain
79
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players
NFT
Intellectual property
Crypto
Fintech
Property
Money
Insurance
Art/Wine/Sports
NFTs
Gaming
Rewards and incentives
China key players
Insurtech
Proptech
Risks
Schulte Research
Monopoly behavior
Antitrust hindering
development
Railroads Required
Blockchain (e.g., BSN)
Central Bank Digital Currency
Incentives to develop
proprietary technology
Fragmented data
Public trust
Sources: Schulte Research
80
61
M O N E Y M E TAV E R S E
Schulte Research
Section 1: The architecture and infrastructure of
Fintech and Blockchain
81
Categorizing Fintech Business Models
He who makes the safest, cheapest and fastest Super App wins
Schulte Research
By Market
By Technology
Lending
Application Program Interface (API)
Payments
Artificial Intelligence
Wealth Management
Blockchain and distributed ledger technologies (DLT)
Insurance Technology (Insurtech)
Cloud computing (Cloud)
Regulatory Technology (Regtech)
Edge computing (Edge)
Quantum computing (Quantum)
Sources: Imperial College London
82
Online banking payment solutions: how it works
Payment model including Payment Initiation Service Provider (PISP)
Lower external fees
Risk mitigation
Schulte Research
Speed of funds
Operational efficiency
Sources: Everyday Bank Research, Federal Reserve
83
62
Paul Schulte
Online banking payment solutions: solutions
Instant payment use case opportunities
Individuals can transfer money
between accounts instantly
A2A
Request for payments electronically
Pay bills instantly, avoiding late fees
and improving cash flow
management
B2C
On-demand payment, freeing up
working capital by paying suppliers
upon receipt
B2B
Prepaid cards, electronic wallets,
investment account management,
and corporate cash pooling
Home service payment upon
delivery
C2B
E-commerce
Request for payment electronically
Pay family & friends immediately or
pay individual for services
Schulte Research
P2P
One-time payments such as
insurance payouts or rebate claims
B2C
Immediate payroll for expedited
payments
Screen-scraping1
make online payments: under PSD2, A2A providers can now access current accounts directly and initiate credit
transfers more securely using open APIs provided by banks
Sources: Every
Everyday
r day Bank Research
ry
Research, Federal Reserve
(1) Automated process whereby data displayed on one site is extracted to be displayed/used on another site
84
Key Trends Product Radar
Adoption in many areas is still primitive
Sales &
Marketing
Insurtech
L&H + P&C
P2P
!
!
Direct
!
!
Schulte Research
Management &
Marketplaces
!
Banking
SaaS
APIs
!
!
!
Team up &
consolidate
premiums
Digitization
Digital wallets
Banking-as-aservice
MAINSTREAM
!
!
Real-time
payments
Cross-border
!
Digital
distribution
!
Compare &
price terms
!
LOW
P2P
Traditional
Crypto
Marketplace
DeFi
!
LOW
Buy Now Pay
Later
!
Tracking &
administration
EMERGING
Crypto + Fintech +
Proptech
Payments
!
Currency &
Tokens
NFTs
Stablecoins
EMERGING
MAINSTREAM
Market Adoption
Sources: Schulte Research
85
Traditional 4-Party infrastructure:
How it works
Roles and key players
Diagram 4-party model
Customer
Provides
credit
Pays
debt
Key roles
Card Payment
ork
e
fe
n
tio
za
ori
th
Au
tw
Ne
Issuing Bank
Merchant
Network
(Clearing &
Settling)
Ne
tw
ork
Au
fe
th
e
ori
za
tio
n
Provides funds to merchant bank
Pays
MDR
Back-end
processing
Merchant
Acquirer
(net of interchange)
Merchant
Accepts payments and pays discount rate (MDR) to the
merchant acquirer
Network
Hub card payment transactions, relaying authorization and
settlement messages between issuing and acquiring banks
Merchant
Acquirer
Front-end: enables individual merchants to accept card
payments; captures card/transaction data, routes the message
to appropriate network for authorization
Back-end: Handles settlement and clearing messages, deposits
funds into
accounts
Card Issuer
Provides consumers and businesses with bank accounts, credit
extension, and cards
Issuer
Processor
Receives authorization request from the card network and relays
decision to the card network; clears and settles transactions for
the issuing bank
Key players
Schulte Research
Merchant
Network
Merchant Acquirer
Card Issuer
Issuer Processor
Front-end Back-end
Sources: Schulte Research
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63
M O N E Y M E TAV E R S E
Online Banking Payment Solutions:
How it works
Payment model including Payment Initiation Service Provider
Instant Payment use case opportunities
Individuals can transfer money between accounts instantly
A2A
Prepaid cards, electronic wallets, investment account
management, and corporate cash pooling
Pay bills instantly, avoiding late fees and improving cash flow
management
B2C
Request for payment electronically
P2P
Pay family & friends immediately or pay individual for services
On-demand payment, freeing up working capital by paying
suppliers upon receipt
B2B
Request for payments electronically
Home service payment upon delivery
C2B
E-commerce
One-time payments such as insurance payouts or rebate
claims
Schulte Research
B2C
Immediate payroll for expedited payments
Lower external fees
Risk mitigation
Speed of funds
Operational Efficiency
Screenaccounts and use credit transfers to make online payments: under PSD2, A2A
providers can now access current accounts directly and initiate credit transfers
more securely using open APIs provided by banks
Sources: Everyday Bank Research, Federal Reserve
(1) Automated process whereby data displayed on one site is extracted to be displayed/used on another site
87
SMEs Cross-border segment:
How it works
Cross-border platforms focusing on SMEs merchants
Selected competitors for SMEs cross-border payments
Cross-border eCommerce market size growth1
in US$
HK-based platform focused in APAC
130+ countries and 50+ currencies
Cross-border is the fastest growing
g
g sub-segment
g
of eCommerce
Brazilian-based offering payments for eCommerce transaction
Provides global merchants access to Brazilian consumers
Cross-border payment volumes pre-COVID: c.50-60% tourism & travel and c.40-50% eCommerce
Cross-border payment volumes around 5 years ago: c.70% tourism & travel
Cross-border payment volumes around 20 years ago: c.90% tourism & travel
China-based platform with US$ 10bn+ in payments volume
Reduces cross-border fees for third-party sellers in China
$4.9 tn
CAGR 27%
Targets SMEs with emphasis on companies with less 100 employees
Simplifies cross-border payments for customers
International money transfer for marketplace sellers and freelancers
Working capital offerings, payout capabilities, fraud prevention
c.200 countries and c.150 currencies
$560 bn
2018
Payment solutions for SMEs, mostly cross-border payments
White-labels solution to banks
2027E
Expanded into B2B payments with business accounts for SMEs
150 countries, 90+ currencies
Schulte Research
Global B2B2X platform
Serves payments providers, challenger banks & issuers, marketplace
platforms, and traditional banks for multi-currency accounts
Payment platform and network with vertical-specific software
Facilitates payments flows across currencies, payment types, and
payment options
Operates through Fleet, Travel, Corporate, Health and Benefits verticals
210 countries and 150 currencies
Corporate payments solutions (e.g., AP, cross-border, virtual card)
200 countries and 145 currencies
Sources: Company filings, Credit Suisse, Payoneer public filings, Wise public filings, Capital IQ
(1) Zion Market Research
(2) Payoneer FY2021; pro-forma Market Cap and Enterprise Value adjusted based on number of shares outstanding disclosed in the SPAC investor deck
88
Global Fintech financing volume
Global Fintech Financing set to outpace 2019 and 2020 by a large margin; Q1 2021 YoY growth 153%
Global Fintech financing volume
Volume of 3 Largest Deals
$53.9
$4.8
$14.0
$45.3
$45.3
$2.6
$3.8
Ant $14 bn private
placement
$29.0
$21.9
$17.5
$9.0
$29.1
$27.0
$5.2
$4.1
$2.6
Schulte Research
$4.4
$5.2
$1.7
2010
$7.0
$6.6
$1.4
$2.7
$1.0
2011
2012
$6.1
Sources: Financial Technology Partners (FT Partners)
2013
Q1 2020
$11.5
2014
2015
2016
2017
2018
2019
2020
Q1 2021
Q1 2021 Fintech Insights
89
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Paul Schulte
P2P Cross-border
Global cross-border payments market
2020 Global cross-border payments market1
Global cross-border payments market volume growth1
Estimated take rate in percentage for each segment
in US$ tn
Personal
SMBs
Enterprise
Personal
SMBs
Enterprise
$12.5bn
$15.3
0.10%
$12.5tn
$164.3bn
$12.5
13.9
1.69%
$9.7tn
9.7
Schulte Research
5% CAGR
5% CAGR
$87.8bn
3.14%
$2.8tn
2.8
Volume (US$tn)
Reve nue (US$bn)
11% CAGR
4.2
2020
2026E
Sources: Wise public filings
(2) Wise Prospectus from Edgar Dunn & Co. data
90
Consumer & Business growth
Volume per consumer and business customer as key growth drivers of revenue
Consumer growth rates1
Mix of transaction type by company1
2018 to 2020 CAGR
All digital
Mon
on
eyG
G ra
m
o ey
e
rram
Remit
Remitly
Ria
ria
Western Union
Digital
yGra
ra
Mone yGram
r m
s
se
Wise
0%
W or
or d
l rre
e mit
-10%
0%
10%
20%
30%
40%
50%
25%
50%
75%
100%
60%
Business growth rates1
P2P cross-border market
2018 to 2020 CAGR
Cross-border money transfer market: banks (c.68%), traditional money
transfer operators (c.13%), other non-banks (c.18%)
Wes
e te
es
t rn Un ion
o Bus
on
u ine ss
us
s
Competitors switching to digital transactions (e.g., Western Union switching
to digital remittances, with digital transactions grown from 15% of C2C
transactions in Q2 2019 to 31% in Q3 2020)
OFX
Schulte Research
All c ash
Worl
WorldRemit
rrl dRemit
WU
Int er
e me
m x
digital
Wes
e te
es
t rn Un ion
o di
on
dgita
t l
ta
Digital initiated to cash payout
Wis
iise
Wise
OF
OFX
Ebur y
Argen
Arg
r en
rg
e te
t x
Wise
s
se
-10%
0%
10%
Sources:
(1) FXC Intelligence estimates
20%
30%
40%
50%
60%
70%
80%
Wise and OFX FY ended 31st March
91
65
M O N E Y M E TAV E R S E
Schulte Research
Section 2: US corporate
92
PayPal
Schulte Research
Case Study
93
Case study 8 – PayPal
Company Overview
PayPal following Chinese Big Tech firms path with super app initiative
Business model
Go-to-market strategy
Industry-leading checkout conversion rate
Buy safely from merchants and accept worldwide payments
PayPal tech platform and brand recognized as one of the most trusted
Consumers: payments, financial services, and shopping
Merchants: payments processing, merchant services, and marketing
global leadership in payments
P2P payments, debit and credit card offerings with Venmo
Careful direct investments and acquisitions of prominent companies
Crypto Checkout and PayPal Crypto offerings
Venmo adding new products (crypto, bill-pay, credit card, Honey
integration, international expansion)
Payment processing with Braintree
Online and POS financing solutions including BNPL, credit card, working
capital and business loans for merchants with PayPal Credit
Braintree undertaking global expansion
Limitations
Goals
Super app initiative announced in Q2 2021, personalized to the end user
using AI and machine learning capabilities to
High checkout fees of 1.9% + 0.30 per card transactions in Europe and
3.45% + US$0.49 per PayPal checkout and 2.59% + US$0.49 card transactions
in the US Recent hike in prices from 2.90% + US$0.30 in August 2021
Schulte Research
Full-stack payments platform improving Alternative Payment Methods (e.g.,
BNPL) and Omnichannel payment processing with Braintree
High take rate on FX and Crypto take rate (c.2.5%)
Populated competitive landscape in POS (e.g., Square), BNPL (e.g., Klarna)
One-stop-shop for SMEs worldwide to take payments, register, track sales,
and get financing solutions with iZettle
Sources: PayPal public filings, Credit Suisse, TechCrunch, Forbes
94
66
Paul Schulte
Consumer and Merchants ecosystem
Business lines
Payments
Checkout
Payment Processing
Charitable
Giving
P2P
QR Code
Checkout
Merchant Services
Schulte Research
Debit Card
Check
Cashing
Direct Deposit
Goals
Remittances
Business Debit
Card
PayPal
Working
Capital
Transactional
Credit
Buy Now, Pay
Later
Credit Card
Crypto
Buy/Hold/Sell
Money Pools
Consumer
Financing
Risk Services
Shopper
Insights
Dynamic
Banners
Shopping Tools
Droplist
Price Tracking
Business Loans
Point of Sale
Inventory
Management
Payouts
Invoicing
QR Code
Merchants
Consumer
Financial Services
Deals and
Offers
Unbranded
Processing
Marketing Tools
Rewards
Deals Engine
Store Cash
Business
Profiles
Sources: PayPal public filings
95
Consumer and Merchants ecosystem
PayPal objectives for Merchants and Consumers centred around a single platform
Schulte Research
Merchants
Consumers
Power all aspects of digital
checkout online, on mobile, and in
store
Provide solutions to help people
manage and move money both
domestically and internationally
Offer access to seamless credit
solutions to enable growth
Offer credit services that are
accessible and cost effective
Help identify fraud and improve risk
management
Facilitate simple, secure payments
across devices
Offer tools and insights to attract
new customers and increase sales
Deliver flexibility with payment
options globally, across platforms
and merchants
Sources: PayPal public filings
96
67
M O N E Y M E TAV E R S E
Visa
Schulte Research
Case Study
97
Case study 9 – Visa
Company Overview
Built on top of proprietary processing network VisaNet, expanding into Blockchain with B2B Connect
Business model
Go-to-market strategy
Global presence in 200+ countries & territories, settlement in c.25 currencies
VisaNet proprietary processing network powers multi-sided platform,
connecting acquirers, merchants, cardholders, and issuers
Focus on eCommerce growth, catalysts in travel industry recovery and POS
payments volume following the COVID-19 pandemic
Revenue from US (c.47%) and International (c.53%)
Aggressively expand into digital (e.g., eCommerce, contactless payments)
Key revenue streams: cross-border transactions, value-added services, data
processing
Emerging cross-border mix with B2B Connect scalability potential and
remittances: less cyclicality in cross-border volumes
Competes directly with Global or multi-regional networks (e.g., Mastercard,
American Express) and indirectly with Square, PayPal, Local and regional
networks, APMs, ACH and RTP networks, payment processors
Well-positioned to capture the trend of payments going towards digital
Continuous investments in emerging and prominent companies to keep up
as an incumbent (e.g., Klarna for BNPL)
At the centre of the traditional 4-party model
Goals
Limitations
Schulte Research
Continuously expand beyond B2C into emerging market opportunities (e.g.,
crypto, A2A) into G2C, B2B, B2b, and P2P
Requires unceasing investments to deliver continuous value to merchants,
cardholders, banks, and ultimately shareholders
Partnerships-oriented approach to innovation to stay on top of increasingly
complex network of payments
Card network processing fees pressure in the US (e.g., interchange caps in
Europe on credit 0.3% and debit 0.2%)
Provide rails across the entire payments industry for partners to build on top
(e.g., B2B Connect infrastructure based on blockchain architecture)
Set to raise fees in the UK following Brexit at 1.5% for credit and 1.15% on
debit. Plans on raising domestic UK and UK-EU transaction fees in 2022
More agile disruptors can rapidly scale technology in niche cases
Layers of regulatory oversights and compliance requirements
Sources: Visa public filings, Financial Times, Wall Street Journal, Medium, Lumos
98
Multi-sided platform
Foundations
Value-added services
New flows
Issuer & Consumer Solutions
Technology
Consumer
Payments
Merchant & Acquirer Solutions
P2P
Schulte Research
Brand
G2C
Core Business
Security
Credit Debit
Prepaid
Global ATM
Fraud Management &
Security Services
B2b
B2C
Data Solutions
Visa Consulting & Analytics
Talent
B2B
Sources: Visa public filings
99
68
Paul Schulte
MasterCard
Schulte Research
Case Study
100
Case study 10 – Mastercard
Company Overview
Higher exposure to international market and credit business compared to Visa
Business model
Go-to-market strategy
Core of the traditional 4-party model, providing network for acquirers,
processors, issuers, and cardholders
Purchase volume of Credit, Debit, and Prepaid represents c.36.8% in the US,
c.27.4% in EU
Revenue US$4.5 bn in Q2 2021 (+36% YoY), driven by Transaction processing
and Domestic assessments (+37% and +39% respectively)
Higher exposure to International & credit business compared to Visa
Proprietary data analytics and consulting for businesses
Notable increase of cross-border volume fees to US$1.1 bn in Q2 2021
(+69%), resulting from reopening of economies following COVID-19
Focus on eCommerce payments and Credit platforms, highest margins
Continuous partnerships and investments in emerging and prominent
companies to keep up with the pace of increasingly complex payments
landscape
Focus on product and services innovation to further gain market share or be
at the forefront of emerging business models in response to new entrants
Goals
Limitations
Schulte Research
Diversify revenue streams by expanding digital payments in emerging
markets and via financial inclusion
Payments, privacy, data, and security regulations
Develop data analytics, cybersecurity, AI organically or via M&A
Card network processing fees pressure in the US (e.g., interchange caps in
Europe on credit 0.3% and debit 0.2%)
Initiatives in new payments flows, including open banking (e.g., acquisition
of Finicity in Q2 2020)
Set to raise fees in the UK following Brexit at 1.5% for credit and 1.15% on
debit. Plans on raising domestic UK and UK-EU transaction fees in 2022
B2B expansion supporting multi-rail payments
Complex competitive landscape with Global payments network (e.g., Visa,
Amex, JCB, UnionPay), LPMs/APMs, Value-added products and service
providers
Sources: Mastercard, Credit Suisse, Financial Times, Lumos, Forbes, Wall Street Journal
101
Products & Services
-rail payment products and core position in the 4-party model
Core network
Products & Services
Core Network
Loyalty &
Rewards
wards
Cyber &
Intelligence
Consulting
Switching
Authorisation | Clearing | Settlement
Multi-rail
payment
products
Schulte Research
Data Analytics
Processing
Payment System Security
Value-added Products and Service
Loyalty and Rewards | Analytics Insights and Consulting
Processing | Cyber and Intelligence
Open Banking
Enabling digital payments
Sources: Mastercard public filings
102
69
M O N E Y M E TAV E R S E
Case study 11 – Square
Company Overview
Business model
Go-to-market strategy
Frictionless Seller ecosystem, enabling cross-selling / up-selling financial
services and products including loans
Square Seller end-to-end solution for merchants (i.e., Hardware, software,
data analytics, payments, financing)
Cash App ex-Bitcoin revenue at US$605.9 m (+86.5%) in Q2 2021
Square for Restaurants and Square for Retail key POS software verticals,
offering all-in-one POS systems
Seller Ecosystem revenue at US$1.4 bn (+86.7%) in Q2 2021
Square Cash App P2P transactions expanding into super app (i.e., full suite
financial services)
Global expansion underway across key markets (e.g., UK, Europe, Australia,
Japan)
7 m weekly Cash Card actives
Revenue generated from transaction fees (merchants) or value-added
services (e.g., trading, instant deposits)
Goals
Limitations
Expand SMEs financing (Square Bank launched Q1 2021), facilitated 136 k
loans for US$923 m in Q1 2021, +68% YoY
Increasing credit risk from SMEs financing and BNPL following
acquisition
Schulte Research
Super app potential with Cash App (e.g., BNPL following Afterpay
acquisition, enhance crypto offering)
Direct exposure to bitcoin volatility, holding US$220 m on BS
Competitive landscape from incumbents with similar products (e.g., iZettle
and Venmo by PayPal)
Square Financial Services Bank in Q1 2021, suite financial products for SMEs
Embark merchants with US$125
>US$500 k
500 k in GPV and larger sellers with
c.7.4% ex-Bitcoin revenue from International
Sources: Square public filings, Financial Times, Wall Street Journal, Credit Suisse
104
Funding since inception
Valued at c.US$2.9 bn at IPO, Square is approaching US$130 bn market cap in 2021
Amount raised, lead investors, and post-money valuation
IPO: US$243 m raised at a US$2.9 bn valuation, now approaching US$130 bn
Investor base: Vanguard, BlackRock, Morgan Stanley, and FMR LLC as top institutional holders
Post-money valuation
Amount raised
$10m
$32m
$100m
$200m
$150m
$243m
6-Nov-09
5-Jan-11
29-Jun-11
17-Sep-12
6-Oct-14
19-Nov-15
$6,000m
Schulte Research
$3,250m
$2,900m
$1,600m
$45m
$240m
Series A
Series B
Series C
Series D
Series E
IPO
Sources: CB Insights, Crunchbase Pro
105
70
Paul Schulte
Square dual-sided platform
High cross-selling / up-selling potential with dual-sided platform merging merchants and consumers
Seller Ecosystem
Cash App Ecosystem
POINT OF SALE
P2P
HARDWARE
PAYROLL
DIRECT DEPOSIT
ONLINE
CROSS-BORDER
MANAGED
PAYMENTS
Schulte Research
CASH CARD
TEAM
MANAGEMENT
Sources: Square public filings
BITCOIN
CUSTOMER
RELATIONSHIP
MANAGEMENT
DEVELOPER
PLATFORM
BOOST
BUSINESS
BANKING
STOCKS
106
Seller Ecosystem
Seller Ecosystem
Managed payments
Payments
POS + Business tools
Vertical-specific software
V
Square Point of Sale
Services
(Appointments, Invoices,
Virtual Terminal)
(in-person and online)
Financial services
Access to Funds
(Instant Deposit, Square
Card)
Customers
(Marketing, Loyalty, Gift
Cards)
Retail
Hardware
(Square for Retail)
Employee tracking &
reporting
Payroll
(Team management)
Risk Management +
Disputes
Food + Drink
(Square for Restaurants)
eCommerce
Financing
(Square Capital,
Installments)
Schulte Research
(Square Online Store)
Platform
(Integration & customization tools)
Payments API Integrations
(Reader SDK, in App Payments SDK,
eCommerce API)
Commerce APIs & Integrations
(8 APIs including Employees API,
Inventory API, and Customers API)
Partner App Marketplace
Sources: SSquare public
Sou
bli fili
filings
107
71
M O N E Y M E TAV E R S E
Schulte Research
US corporate second tier names
108
Marqeta
Schulte Research
Case Study
109
Case study 12 – Marqeta
Company Overview
Blue Ocean B2B solution allowing flexible and quick go-to-market access for companies
Business model
Go-to-market strategy
Focused on new channels of card issuance vs. traditional banks
Tailored cloud-based open API platform delivers card issuing and
transaction processing services
Usage-based model based on processing volume
Enables any company or brand to issue card across a wide range of use
cases
Majority revenue from Interchange Fees generated by card transactions
Offers flexible and reliable on-demand service for modern card issuance
Substantial product & technology hiring to improve and expand products
and services offering
Backend-as-a-Service becoming the option of choice for costeffectiveness and go-to-market speed
Focused around single solution for best performance instead of end-to-end
solution
B2B customers: employers, on-demand platforms, challenger banks, core
payments & P2P platforms, Fintech issuers, brands
Schulte Research
Goals
Limitations
Diversify revenue streams by increasing transaction volumes with recent
partnerships (e.g., Marcus by Goldman Sachs)
Revenue highly dependent on Square, generating 60% and 70% in FY2019
and FY2020 respectively
Targeted sales strategies to act as both Program Manager and Issuer
Processor
Increasing competitive landscape from emerging issuers such as Adyen
and Stripe
Focused on improving current specialization instead of providing end-toend solution
Revenue streams dependent on Marqeta acting as Program Manager
revenues are more lucrative since Marqeta earns interchange fees and
processing fees
Risk consumers such as Square develop technology in-house
Sources: Marqeta public filings, FT Partners, Credit Suisse, Financeit
110
72
Paul Schulte
Funding since inception
Prominent investor base, including Visa and IconIQ as lead investors
Amount raised, lead investors, and post-money valuation
IPO: raised US$1,228 m at higher price of US$27 rather than initial price range of US$20
Post-money valuation
24
Amount raised
$6m
$14m
$25m
$25m
$45m
$260m
$150m
$1,228m
16-Jun-11
15-Mar-13
27-Apr-15
26-Jul-17
5-Jun-18
21-May-19
28-May-20
9-Jun-21
Schulte Research
$14,317m
$4,300m
$9m
$64m
$87m
$414m
$500m
Series A
Series B
Series C
Series D
Series D-II
$2,000m
Series E
Series E-II
IPO
Sources: CB Insights, Crunchbase Pro
111
Modern card issuance framework
Issuing Bank1
Issuer
Processor
Program
Manager
Schulte Research
Payment Network Providers
Non-bank
Issuer
Roles and key players in Modern Card Issuance
!
Owns the cardholder relationship
!
Marketing and/or distribution of cards
!
Holds bank license
!
Final approval on account creation
!
Minimal role
!
Routing of card transactions for approval
!
Account number & card generation
!
Offer APIs to developers
!
Oversees P&L of program, along with fraud and compliance
!
Maintains relationship with issuing bank and card networks
(1) Bank Partners used by FinTechs are typically exempt from Durbin debit interchange caps. Institutions with assets of less than $10 billion are exempts from interchange fee
112
Interchange Fee Regulations
High interchange fee in the US; Potential limits to international expansion
US average debit card interchange fee in 2019
Interchange take rate estimates
0.94%
Covered transactions: purchase transactions covered by interchange fee standard
Exempt Transactions: purchase transactions exempt from the interchange fee standard
Single -message interchange fee average
0.64%
0.69%
0.24%
0.19%
0.03%
Dual-message interchange fee average
0.54%
Square
rre
Marqeta
Marq
rrq eta
Sutton
Sutto
tto n Bank
1.41%
Source: Federal Reserve Regulation II (Debit Card Interchange Fees and Routing)
Source: Federal Reserve Regulation II (Debit Card Interchange Fees and Routing); Marqeta S1
(1) Square used as a figurative example
(2) Square estimated based on exempt transactions dual-message interchange fee less fees
incurred by Card Networks, Marqeta, and Issuing Bank
(3) Card Networks, Marqeta, and Issuing Bank fees estimated based on net revenue from
Interchange and Processing fees and Costs of Revenue from Card Network and Issuing Bank
Durbin Amendment to the Dodd-Frank Act provides that Interchange Fees
that an issuing Bank or Card Network receives for debit transactions are
regulated by the Federal Reserve. Marqeta only contract with Issuing Banks
(Sutton Bank), who are exempt from the Durbin Amendment, to access
higher interchange rates
Schulte Research
Card
Network
rrd Net
t wor
Interchange caps in Europe on credit (0.3%) and debit (0.2%)1, potentially
Federal Reserve proposing changes to Regulation II2 that would require
merchants have a choice in how online transactions are routed. Potentially
reduce interchange fee as merchants would be able to route their
transactions across Visa, Mastercard or smaller debit networks with lower
fees
Sources: Marqeta, Federal Reserve, Credit Suisse
(1) Interchange Fee Regulation 2015 and 2016
(2) May 7 2021: Federal Reserve Board invites public comment on proposed changes to Regulation II regarding network availability for card-not-present debit card transactions
113
73
M O N E Y M E TAV E R S E
SoFi
Schulte Research
Case Study
114
Case study 13 – SoFi
Company Overview
Strong tailwinds with Galileo and conditional approval on Bank charter
Business model
Go-to-market strategy
Business lines: Borrow, Invest, Spend, Protect, and Business
Targets Highly Educated Not Rich Yet (HENRY) consumers notably student
debt lending and refinancing
Heavily relies on technology base for Lending to develop new products and
services
Focus shifting to High Earners Not Well Served (HENWS) consumers
Galileo provides API and payments platform powering the infrastructure of
SoFi and white label for card issuing and digital banking (e.g., Chime,
Monzo, Robinhood, Wise)
Cross-selling by offering diverse product portfolio at a one-stop-shop
Q1 2021 revenue of US$220.6 m (up 159.9% YoY) from Lending (76.2%
growing 105.5% YoY), Tech platform Galileo (20.9% up 46.2x YoY), and
Financial Services (2.9% up 200.0% YoY)
Capture share from traditional financial institutions
Limitations
Schulte Research
Goals
Widening comprehensive suite of products aiming to gain further market
share from single point solution providers
Risk of being overtaken by more agile competitors on innovation, brand
awareness, etc. (e.g., well-funded legacy banks, digital banks)
Aim to own entire technology stack by benefitting from developing inhouse to reach scalability, capitalising on the acquisition of Galileo
Unprofitable business with US($44.6) m in Adjusted EBITDA, expecting to
reach Adj. EBITDA profitability in 2021E of US$27 m
Preliminary approval for national bank charter (Q4 2020), plans to acquire
community bank to accelerate process
Lack of bank charter impacting access to lower cost of capital and
increasing lending capabilities
Fragmented nature of financial products and services landscape in the US
present opportunity for consolidation, with significant economies of scale
potential
Management projects cumulative incremental EBITDA gain from
bank charter of US$1,005 m until 2025E)
Sources: SoFi, Forbes, Seeking Alpha, Credit Suisse
115
74
Paul Schulte
Funding since inception
SoftBank-backed prominent one-stop shop in the US
Amount raised, lead investors, and post-money valuation
SPAC: raised US$2.4 bn at a US$8.7 bn valuation, including US$1,225 m from PIPE and US$370 m from T. Rowe
Softbank, SilverLake, and Qatar Investment Authority as Lead investors
Post-money valuation
Amount raised
$2m
$77m
$30m
$80m
$200m
$1,000m
$150m
$500m
$500m
$2,400m
8-Sep-11
11-Sep-12
2-Oct-13
3-Apr-14
3-Feb-15
19-Aug-15
27-Oct-15
24-Feb-17
29-May-19
1-Jun-21
$8,650m
Schulte Research
$4,800m
$4,300m
$4,000m
$3,065m
$7m
$195m
$87m
$413m
Series A
Series B
Series C
Series C-II
$1,300m
Series D
Series E
Series E-II
Series F
Series G
SPAC (completed)
Sources: CB Insights, Crunchbase Pro
116
One-stop shop for financial services
SoFi diversification to full play financial services
Student Loan Refinancing
Borrow
Private Student Loans
Personal Loans
Home Loans
Active Investing
Invest
Automated Investing
Retirement Accounts
Crypto
Home/Auto Insurance
Protect
Life Insurance
Real Estate Planning
Business
SoFi at Work
Schulte Research
Small Business Financing
Spend
SoFi Credit Card
Bank accounts
Sources: SoFi, Forbes, Seeking Alpha, Credit Suisse
117
75
M O N E Y M E TAV E R S E
Robinhood
Schulte Research
Case Study
118
Case study 14 – Robinhood
Company Overview
Pioneered commission-free trading with an intuitive UI but oversimplified functionalities
Business model
Go-to-market strategy
Pioneered commission-free trading by profiting from PFOF practices
Simple and easy-to-use mobile app and online brokerage, keeping
information streamlined
No minimum account requirements, targeting lower-income first-time
investor
Small margins on individual trades at scale by attracting large number of
users
c.80% of customers acquired through Referrals or organic growth
Transaction-based revenue (c.80.5% in Q1 2021) from routing user orders for
options, equities, and cryptocurrencies
Attracts users using incentives and retains them with behavioral triggers
Investing solutions for stocks, ETFs, and options with valuto market makerseadded functionalities (e.g., recurring investments, fractional shares, IPO
Access)
Goals
Limitations
Oversimplified UI, limited investing solutions offerings (e.g., no futures, fixed
income) and rudimentary charting
Cash management with Debit card and deposits earning interest
Micro-investing services, reinvesting spare changes (similar to Acorns)
Operating risks (e.g., service outage), liquidity issues (e.g., increase deposits
requirements imposed on RHS by NSCC)
Schulte Research
Diversify revenue, as Robinhood relies on PFOF to a higher extent than
competitors
Weakness in equity markets such as slowdown cause reduction in trading
volume
IPO Access for retail investors, by buying shares as an institutional investor
and reselling to Robinhood users
Regulatory risks looming over PFOF practices, representing c.80.5% of
revenue in Q1 2021
Heavy investments in compliance and risk management to avoid future
backlash from outages or trading suspension
Sources: Robinhood public filings, Financial Times, Investopedia, CB Insights
119
Funding since inception
US$3.4 bn raised to meet clearinghouse minimum requirements in Q1 2021 (Trading restrictions)
Amount raised, lead investors, and post-money valuation
Robinhood failed to meet clearinghouse requirements in Early 2021, forcing US$3.4 bn raise in Convertible Note. Customers prevented from purchasing specified securities
US$1.5 bn fair value adjustment to convertible notes and warrant liability in Q1 2021, resulting in a US$1.44 bn loss compared to US$52.50 m loss in Q1 2020
Post-money valuation
Amount raised
$13m
$50m
$110m
$363m
$373m
$320m
$460m
$3,400m
23-Sep-14
7-May-15
26-Apr-17
10-May-18
29-Oct-19
1-Jun-20
23-Sep-20
1-Feb-21
$11,700m
$8,600m
$7,600m
Schulte Research
$5,600m
$77m
$242m
$1,300m
Series A
Series B
Series C
0
Series D
Series E
Series F
Series G
Convertible Note
Sources: CB Insights, Crunchbase Pro, Robinhood public filings
120
76
Paul Schulte
Competitive landscape
Robinhood pioneered commission-
Millenials
Disrupted brokerage fees by introducing commissions-free trading
Number of accounts in k
Forced competitors (e.g., Charles Schwab, E*Trade, TD Ameritrade) to levy
fees on equities trading, options, and ETFs
Average account value in US$ k1
# Accounts
Ave rage Account Value
$232.0 k
Robinhood relies on PFOF (c.80.5% of net revenues in Q1 2021) to a higher
extent than competitors however
$113.0 k
22.5 m
$4.4 k
Robinhood
11.5 m
$106.7 k
31.9 m
7.5 m
TD Ameritrade
E*Trade
Charles Sc hwab
Payments For Order Flow by Average Account Value
Schulte Research
$74,444
Indirectly competes (different customers targeted)
Indirectly competes (full-suite financial products and services)
Robinhood
$3,806
$1,307
$337
TD Ameritrade
E*Trade
Charles Sc hwab
Examples other Fintechs (micro-investing, automated investing, fractional shares
trading, online banking facilities)
Sources: Robinhood public filings, Alphacution, Brokerage-review, Businessofapps, Wall Street Journal
(1) Estimated via Robinhood and Schwab public filings, Businessofapps and Brokerage-review data
121
Robinhood platform vs. US-based competitors
Pioneered free trading fees; low margin rates; investment options lacking in Futures, Forex, Bonds, and Mutual Funds
Trading fees
Minimum deposit
$0.00
Stock/ETF Trade fee
$0.00
Mutual Fund Fee
Options (per contract)
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$49.99
$0.00
$19.99
$0.00
$49.95
$0.00
$49.95
$0.65
$0.65
$0.65
$0.65
$0.00
$14.95
$0.65
$14.95
$0.65
Futures (per contract)
$2.25
$1.50
$1.50
Broker Assisted Trades Fee
$44.99
$25.00
$25.00
$32.95
$0.00
$0.00
$1.50
$0.85
$50.00
$30.00
Margin Rates
Under US$25 k
2.50%
US$25 – 50 k
2.50%
9.50%
9.00%
8.95%
8.33%
8.45%
8.33%
7.83%
7.83%
6.99%
6.49%
9.50%
9.50%
1.59%
1.59%
US$ 50 – 100 k
2.50%
8.00%
7.95%
6.88%
6.88%
6.49%
8.75%
1.59%
US$100 – 250 k
2.50%
7.75%
7.45%
6.83%
6.83%
5.99%
8.75%
1.29%
US$ 250 – 500 k
2.50%
7.50%
6.95%
6.58%
6.58%
5.49%
8.75%
1.19%
US$500 – 1 m
Above US$1 m
2.50%
2.50%
N/A
N/A
6.45%
5.45%
5.08%
4.70%
4.25%
4.00%
4.99%
4.99%
5.50%
5.50%
1.14%
0.75%
4357
11080
Investment Options
Stock Trading
Fractional Shares
OTCBB
Options Trading
Schulte Research
Futures Trading
Forex Trading
Crypto Trading
Mutual Funds (Total)
12330
9087
9860
9842
Bonds (US/Corporate/Municipal)
Advisor Services
International Trading
Sources: Stockbrokers.com
122
Robinhood platform vs. US-based competitors
Basic order types fit for retail investors; customer service; and charting features oversimplified
Order Types
Market
Limit
Stop
Trailing Stop
Contingent
MultiContingent
OCO
OTO
OTOCO
Customer Service
Phone Support
(Limited)
Email Support
Live Chat
24/7 Support
Charting Features
Trade Off
Indicators / Studies
5
489
119
41
129
44
290
121
Drawing Tools
Historical Trades
0
22
31
15
22
14
23
9
Schulte Research
Corporate Events
Automated Analysis
Save Profiles
Technical Analysis
Sources: Stockbrokers.com
123
77
M O N E Y M E TAV E R S E
Robinhood platform vs. US-based competitors
Oversimplified interface neglecting day trading and options trading functionalities
Day Trading
Basic Stock Alerts
Advanced Stock Alerts
Direct Market Routing Stock
Direct Market Routing Options
Ladder Trading
Level 2 Quotes – Stocks
Level 2 Quotes – Options
Short Locator
Order Liquidity Rebates
Options Trading
Option Chains – Quick Analysis
Option Analysis – P&L Charts
Option Probability Analysis
Option Positions – Greeks
Option Positions – Adv. Analysis
Option Positions – Rolling
Schulte Research
Option Positions – Grouping
Sources: Stockbrokers.com
124
PFOF by Wholesale Market Maker
Citadel and Susquehanna dominating PFOF order routing with c.43% and c.21% market share respectively in Q1 2021
Quarterly PFOF by Market Makers
Quarterly PFOF by Market Makers
Data in percentage of total PFOF
2%
1%
4%
10%
9%
11%
24%
3%
2%
3%
7%
7%
13%
24%
Data in US$ m
2%
3%
2%
2%
5%
3%
5%
3%
5%
8%
7%
4%
3%
7%
9%
12%
10%
25%
25%
2%
2%
4%
11%
3%
4%
$3,000 m
Others
$2.7 bn
Citigroup
$56 m
$62 m
$118 m
$130 m
$2,500 m
Jane Street Group
11%
$200 m
UBS Securities
$2,000 m
$301 m
Two Sigma Securities
24%
21%
$1,500 m
Das h Financ ial
$651 m
Morgan Stanley & Co.
$1.1 bn
$1,000 m
Schulte Research
Wolverine Se curities
38%
40%
42%
45%
42%
43%
Virtu Americas
$500 m
Susquehanna International
Group
$44 m
$99 m
Citadel Securitie s
Q1 2020
Q2 2020
Q3 2020
Q4 2020
FY2020
$412.9 m
$0 m
Q1 2021
$155 m
Q1 2020
$724.8 m
$730.0 m
$49 m
$91 m
$56 m
$88 m
$173 m
$182 m
$799.5 m
$57 m
$78 m
$197 m
$293 m
$309 m
$356 m
Q2 2020
Q3 2020
Q4 2020
$95 m
$117 m
$1,113 m
$234 m
FY2020
Q1 2021
$473 m
Sources: SEC 605/606 disclosures, Alphacution
125
78
Paul Schulte
Wise
Schulte Research
Case Study
126
Case study 15 – Wise
Company Overview
Disrupted fees for cross-border remittances, entering SMEs cross-border payments space
Business model
Go-to-market strategy
Network of local payment systems designed to replace intermediaries by
providing end-to-end solution for remittances and cross-border payments
Expansions and integrations by partnering with local financial institutions to
access domestic payment rails
Wise Business targeted at SMEs to provide cross-border payments (including
batch processing)
Built on single API to enhance efficiency, accessibility, and go-to-market
speed
Core engine advanced payments tech, including payments systems
integrations, global real-time treasury management system, smart multicurrency ledge, automated KYC and AML
Open API platform integration for Neobanks/Fintechs/traditional financial
institutions accessing Wise entire infrastructure
Revenue in Q1 2021 +43% YoY at £123.5 m, processing £16.4 bn (+54% YoY),
average take rate down 6bps at 0.75%
Goals
Limitations
Schulte Research
End-to-end solution for cross-border remittances and payments for both
retail and businesses
Comply with complex domestic regulations, including licensing coverage to
support further foreign exchange routes
Improve SMEs cross-border payments with batch payments, accounting
integration, payroll, etc.
Goal to reduce fees over time requires increasing scalability or
diversification of revenue streams in value-added services
Deepen connection by seeking own regulatory licenses
Limited presence of Wise Business compared to competitors for SMEs
especially
Directly integrate with local payment systems to reduce fees
Well-funded traditional competitors (e.g., Western Union) transitioning
heavily into digital remittances and SMEs financing
Global multi-currency bank accounts in partnership with Visa and
Mastercard for card issuance and local financial institutions
Sources:
(1) Footnote 1
(2) Footnote 2
(3) Footnote 3
127
Funding since inception
Backed by Andreessen Horowitz, Baillie Gifford, Jupiter, and IVP
Amount raised, lead investors, and post-money valuation
Direct listing: US$11 bn valuation, providing liquidity for existing shareholders
Post-money valuation
Amount raised
$1m
$6m
$25m
$58m
$26m
$280m
$292m
$319m
18-Apr-12
14-May-13
10-Jun-14
26-Jan-15
25-May-16
2-Nov-17
22-May-19
14-Jul-20
7-Jul-21
$11,000m
Schulte Research
$5,000m
$3,500m
$5m
$23m
$240m
$1,008m
$1,100m
Seed VC
Series A
Series B
Series C
Series D
$1,600m
Series E
Secondary Market
Secondary Market – II
IPO – Closing
Sources: CB Insights, Crunchbase Pro
128
79
M O N E Y M E TAV E R S E
Wise infrastructure replacing correspondent
banking system
P2P cross-border money transfer and FX, expanding into B2B2X for SMEs
Thai correspondent
US correspondent
d
Asia correspondent
Wise Thai bank
Schulte Research
Wise
i US ba
bank
eliminates intermediaries and manual processes for better
costs savings, transparency, and fewer delays
Sources: Wise public filings
129
Wise Transfer and Wise Multi-currency account
Core P2P transfers generating US$ 473.8m in revenue in FY2021, 35.6% growth YoY
Wise Transfer
Wise multi-currency account
Send money to 80+ countries, covering 85%
Holds 56 currencies
Wise Transfers uses local pools of liquidity to eliminate payment processing
inefficiencies
Debit card conversion fees at mid-market + conversion fee between 24bps
and 369bps similar to Wise Transfer
Accounts hold currency around the world from local payments received
from customers
Automatically spends in the currency with best conversion rate
License to carry out regulated investment activities granted in Q1 2020:
opportunity invest currency balances in funds protected up to £85,000
In-house treasury function to purchase currency in the open markets
Customers know exact amount charged before transaction initiated
Schulte Research
Pay in
C
Conversion
Pay-out
Payment order: amount, source, target currency
Fund transfer to local Wise bank
Bank transfers, card payment, or open banking
KYC, fraud, AML, due diligence checks
Conversion into target currency
Guaranteed mid-market rate
Pay out from Wise local bank
Timing depends on factors (e.g., currency, liquidity)
83% in 24 hours; 62% in 1 hour; and 38% instantly
Sources: Wise public filings
ngs
130
80
Paul Schulte
Core Service: Wise Transfer in c.80+ countries
One way send money to
Two ways send money to and from
Schulte Research
Wise Debit card available
Sources: Wise public filings
131
Wise Business and Wise Platform
B2B segment generating US$ 110.6m in revenue in FY2021, +56.6% growth YoY
Wise Business
Wise Platform
Tailored to freelancers, entrepreneurs, and SMEs
Money transfer
50+ currency balances
Debit card
Local account details
Direct debits
Business onboarding
Business verification
Batch payments
Multi-users access with roles & permissioning
Accounting syncs & reporting
Open API
Allows banks and enterprise partners to
into their own applications or online banking
!
!
Allows distribution partners (e.g., core banking software and technology
services providers) to enhance product offerings by pre-integrating Wise
!
!
Partners can cut operational costs and
compliance infrastructure
!
!
!
!
!
!
“
!
“
!
!
!
Integrations are free for clients and built on Open API
!
Wise Platform integrated with 14 banks in 11 countries across 4 continents
“
“
“
Invoicing, Payment automation, and Accounting integration with Xero,
QuickBooks, and FreeAgent
Schulte Research
Wise Business Debit Card handled in c.70 countries
Batch payments of up to 1,000 payments at a time
Multi-users accounts and real-time notifications
SME market dwarfs the consumer market, but human intervention implies
lower growth rates
Sources: Wise public filings
132
81
M O N E Y M E TAV E R S E
Flywire
Schulte Research
Case Study
133
Case study 16 – Flywire
Company Overview
More of a billing company than payments
Business model
success based on global network
Go-to-market strategy
Global payments platform facilitating payments flows across multiple
currencies, payment types, and payment options
Operates in c.240 countries & territories and c.130 currencies
Key verticals: Education (c.1.9k institutions), Healthcare (c.80 systems),
Travel, and B2B industries (c.200 clients)
Full-suite of solutions, including tailored invoicing, settlement and
reconciliation tools, single sign-on and checkout, recurring payments, and
split payouts
Sales channel: integrates into (i) existing A/R workflows and (ii) ERP systems
Global payments network to accept and settle payments, directly
integrated with alternative payment methods (e.g., Alipay, PayPal, Trustly)
Targets sectors lagging in technology solutions to facilitate complex
payments systems
Software package tailored for vertical-specific use cases
Development global network of bank, payment, and technology partners
Goals
Limitations
Exposed to fluctuations in foreign currency exchange rates
Leverage deep data and analytics to provide innovative solutions to
lagging sectors
Fragmented and increasingly populated competitive landscape
Global data privacy, regulations, and compliance risks
Schulte Research
Expand and develop new verticals, including relatively new B2B vertical
Unprofitable company, with
saturated Education vertical
Continuous investments in proprietary technology development in-house or
via M&A to stay competitive
Sources: Flywire public filings, Seeking Alpha
134
Funding since inception
High caliber of institutional investors pre-IPO, including Goldman Sachs, Marshall Wace, Bain Capital
Amount raised, lead investors, and post-money valuation
IPO: raised US$250.6 m at a US$2.4 bn valuation
BainCapital, Goldman Sachs, and Marshall Wace as Lead investors
Post-money valuation
Amount raised
!”#
$8m
$13m
$22m
$100m
$120m
$251m
22-Oct-10
16-Aug-11
30-Dec-13
13-Jan-15
26-Jul-18
13-Feb-20
26-May-21
Schulte Research
$2,395m
$1,000m
$10m
$39m
$40m
$100m
Seed VC
Series A
Series B
Series C
$453m
Series D
Series E
IPO
Sources: CB Insights, Crunchbase Pro
135
82
Paul Schulte
Technology Platform
Cloud-native infrastructure to provide seamless integration via open API or tailored-specific solutions for key verticals
Build your own
Education
Healthcare
Travel
B2B payments
Education SaaS
Healthcare SaaS
Travel SaaS
B2B SaaS
Application
Application
Application
Application
Data
Data
Data
Data
Schulte Research
Public API
Platform as a Service (PaaS)
Runtime
Operating Systems
Servers
Storage
Transaction
monitoring
Payment network
Sources: Flywire public filings
136
Payment Partners & Clients across Flywire key verticals
Payment Partners
Education Vertical
Healthcare Vertical
Travel Vertical
Admissions
Ad
i i
& Enrollment
E
ll
tM
Managementt
Software Services
ERP
Schulte Research
Industry Associations
B2B Vertical
Agent Associations
Sources: Flywire public filings
137
83
137
M O N E Y M E TAV E R S E
Schulte Research
Section 3: China corporate
138
Tencent
Schulte Research
Case Study
139
Case study 17 – Tencent
Company Overview
Value-added propositions in B2B and B2C in Fintech
Business model
Go-to-market strategy
Key verticals: Gaming (#1 Global game operator by revenue on mobile
and PC), Fintech & Business, and Social Media (QQ, WeChat)
Minimize expenses across value chain through automation and low-price
value-added proposition
Most popular instant messaging platforms (QQ), and social mobile app
(WeChat). Revenue from digital advertising, digital content subscriptions,
and membership privileges
Value-added proposition:
Mobile payments for end-users with WePay
B2B-focused in online advertising and financial services
Tencent Games with internal development studios, investments in external
companies globally, and partnerships
B2C-focused in financial services, games, and social networks
Fintech (B2B and B2C): payments, wealth management, lending, insurance
Increased focus in Fintech services, greater transaction costs as TPV grows
Increased spending on Cloud Services business to enlarge scale
Limitations
Goals
BNPL access with Fenfu and repayment through WeChat
Anti-trust investigations due to Tencent potential position as a monopoly
(e.g., Tencent only offering their own payments systems instead of
competitors such as Alipay)
Schulte Research
Dive deeper into financial products for SMEs (c.90% businesses in China),
especially lending capabilities and supply chain financing with Linklogis
(c.15% equity stake post-IPO)
Chinese regulations on Big Tech
WeBank expanded credit to SMEs, leveraging massive user bases to bring
financial institutions on board
Tencent finance-related businesses ordered to restructure as a new
Financial Holding Company
Flywheel effect by leveraging existing payment app to encourage existing
customer base across all verticals
Sources: Tencent public filings, PBOC
140
84
Paul Schulte
Diversified revenue streams
Fintech and Business Services growing at a fast pace, benefitting from flywheel effects of other key verticals
Revenue from Business Segment1
Data in
bn
Segment
2%
5-year CAGR 33%
1%
Fintech and Business services
28%
27%
Transaction-based revenue
Enterprise and consumers
E
Payments, Wealth management, Fintech services
Cloud and other enterprise services
2%
2%
27%
Online advertising
17%
17%
Traffic-based revenue
Enterprise
E
Social: WePay, QQ, app store, browser, etc.
Media: news, video and music, etc.
23%
18%
18%
19%
Schulte Research
17%
11%
18%
41%
33%
47%
24%
2016
VAS: Games
32%
32%
23%
22%
2020
LTM 2021
Fee-based revenue
30%
24%
23%
23%
2017
2018
2019
VAS: Social networks
Fee-based revenue
Consumers
C
Mobile games
PC games
Console games
Consumers
C
Digital content subscriptions
Membership privileges
Virtual item sales
Sources: Tencent public filings
(1) Others include Fintech and Business services for FY2016 and FY2017
141
Fintech and Business services verticals
WeChat Pay and Alipay dominating micro-payments in China
Payment Solutions
Other Fintech services
LiCaiTong
Wealth management services including compliant and inclusive
financial products
Insurance services
c.1 bn average daily commercial payment transactions since Q4 2019
WeSure
Take rate from merchants for commercial transactions
Small-sized and maturity consumer loans
Social and other transactions including red packets, bill sharing, and utility
payment
WeiLiDai
Cloud Services
Distribution fees from WeBank with no credit risk or BS exposure
Other Business services
Tailored smart industry solutions to transform businesses to digital across all
major verticals
Schulte Research
Tencent Cloud
WeCom
Tencent Meeting
IaaS, PaaS, SaaS, and technology solutions for enterprises
Smart Retail
Smart Healthcare
Smart Transportation
Smart Education
IaaS: Star Lake server and T-block technology enhance service
PaaS: Security and real-time communication PaaS
SaaS: Tencent Meeting, WeCom, Tencent Docs for digitalisation
Sources: Tencent public filings
142
85
M O N E Y M E TAV E R S E
Tencent Cloud & Fintech sub-verticals
Investments in Blockchain, Cloud infrastructure, and AI paying off across Fintech sub-verticals
Technological capabilities
Fintech sub-verticals
Connecting industries, consumers, and business partners
Smart industry solutions leveraging Tencent Cloud infrastructure, proprietary technologies to assist
businesses achieve digital transformation
Leverages blockchain, AI, big data, cloud
computing, and edge computing capabilities to
power proprietary technologies across all Fintech
sub-verticals
Payments: Weixin Pay, QQ wallet, Transit QR
code
Smart Solutions
Retail
Software and
Services
Healthcare
WeCom
Meeting
Education
Docs
Transportation
Weixin
Weixin Pay
Wealth Management: LiCaiTong offers
financial products (e.g., money market fund,
investment-linked products, overseas
investment funds)
Finance
Trading platforms: Tencent Portfolio provide
users real-time market information
Security
Tax refund: WeTax Refund
B2B Payments: Business Tenpay offers secure,
compliant, and flexible corporate account
management system for eCommerce
platforms
Technologies
Schulte Research
Security
Autonomous driving YouTu AI Lab
AI Lab
Big Data
Location services
Range products & services (>300) on top of computing and storage
Infrastructure in 27 regions and 62 availability zones as of Q1 2021
c.1m+ paying customers since Q4 2019
Infrastructure
Sources: Tencent p
public
blic filings
143
AI, Machine learning, Big data, Blockchain
AI operating across all Tencent current and future verticals, continuously innovating (e.g., Big Data Tiangong)
AI & Machine learning
Big data and Blockchain
Artificial Intelligence Labs in 2016
Tencent blockchain applied to e-receipt, supply chain finance (equity stake
in Linklogis), judicial evidence management, etc.
Deep focus on machine learning, speech recognition, natural language
processing, and computer vision
Big data to target right audience accurately:
Ambition to help China become a leader in personalized medicine using AI
Integrate intelligent data management platform combining internal
and external data
Aim to integrate medical institutions with WeChat:
Provide advertisers with diversified, open, and safe communication
service platform
Book appointments online
Accept payments
Train AI algorithms with consumer data from these services
Partnership with Babylon Health, consumers access virtual
healthcare assistant
Platform launched in April 2021
Mying healthcare platform launched in 2017 to help diagnose cancer,
analyse, and manage healthcare records
Self-developed 4th generation fusion computing platform
Big data and AI basic operators, unifying metadata for execution
optimization, batch unification, stream, and graph computing
Schulte Research
Global investments on AI equity deals, notably in the US
Unify computing and compiling engine
trillions of data analysis
Sources: Tencent public filings, INF, Pandadaily, Bernard Marr & Co.
144
86
Paul Schulte
Ant Group
Schulte Research
Case Study
145
Case study 18 – Ant Group
Company Overview
-payment for SMEs and consumers
Business model
consumers and merchants
Go-to-market strategy
Drive user engagement and expand user base through Alipay to propel
flywheel effect across Food and Beverage, Mobility, Entertainment, and
Healthcare & Municipal verticals
delivering micro-payments between
Develop comprehensive digital payment, finance, and daily life services
beyond China
Build value and maintain open platform with partners (i.e., Financial
institutions, Merchants, Service providers)
Constant product innovation to anticipate consumer and business needs
and deliver differentiated products and services
Refocus on core business following regulatory backlash
Focus on SMEs financing and helping them grow their businesses on a
global scale
Goals
Limitations
Technology innovation, especially blockchain:
Regulatory backlash following IPO
Build and upgrade digital infrastructure for new services
Forced to share Credit Data with SOEs, as a joint-venture with state-owned
enterprises in Q3 2021
Schulte Research
Improve understanding of customers and enable partners
Establish Ant Group as Financial Holding company, separating Jiebei and
Huabei as separate consumer finance company
Expand applications of AntChain
Continue digitalization of assets on AntChain
SMEs and consumers
Enable circulation of digitalized assets on a wider scale
, focusing on micro-payment for
Hold increasing amount of capital to offer loans, with commercial banks
limited to hold no more than 70% of capital when providing loans
Expand cross-border payment and merchant services by serving more
users, enabling more merchants, and broaden service offerings
Sources: Ant public filings, Schulte Research
146
Ant Ecosystem
Schulte Research
Alibaba entity
Chinese equivalent
West equivalent
Sources: Alibaba public filings, Quartz, Schulte Research
147
87
M O N E Y M E TAV E R S E
Alibaba Ecosystem, directly or via investments
Schulte Research
Alibaba entity
Key vertical
West equivalent
Alibaba entity
Key vertical
West equivalent
Online payments
Mobile messaging
Cloud services
Car service, ride sharing
Mobile apps
C2C e-Commerce
Mobile OS
Online travel booking
Maps and navigation
B2C e-Commerce
Retail outlets
E-learning
Group buying
Microblogging
Cloud storage
Streaming video
Sources: Alibaba public filings, Quartz, Schulte Research
148
Business and size
Summary size and scope of Ant Group
1,000+ m
80+ m
Alipay app
Alipay app
Annual Active Users
Monthly Active Merchants
711 m
729 m
Alipay app
Alipay app
Monthly Active Users
Digital Finance Annual Active Users
2,000+
200+
Partner Financial Institutions
Alipay app
Countries and Regions with Online Payment Services
118 tn
1.7 / 0.4 tn
Schulte Research
Digital Payments
CreditTech
Total Payment Volume in Mainland China
Consumer / SME Credit Balance
4.1 tn
52 bn
InvestmentTech
InsurTech
Assets Under Management
Sources: Ant public filings
Insurance Premiums and Contributions
Data as of 30th June 2020
149
Ant Cloud
Fintech & Smart Banking
Fintech of Ant & core products
Smart banking
Ant Cloud 100% owned by Ant Financial
Smart Banking service provides:
Intelligent customer service
Marketing
Big data risk control
Product and channel operation
Improve user experience
Improve operational efficiency
Reduce operating costs
Ali Cloud 100% owned by Alibaba
Close relationship: Many Ant Cloud products can be found in Ali Cloud
For life cycle of application, fintech will focus on: Financial intelligence,
financial security, financial distributed architecture, mobile development,
blockchain and financial distributed database
Advantages
Several core products:
SOFAStack
Advanced Risk Control
Fi
Financial
i l distrib
distributed
t d architecture,
hit cture
t
providing
idi
p
project
j t managementt and
nd
monitoring allowing for remote disaster recovery and low cost expansion
Integrates
t
t iinternal
t
l and
nd external
t
l
data,
Builds unified financial-level
intelligent risk platform,
mPaaS
Schulte Research
Financial-grade mobile development
opment platf
platform providing cloud-to-endone-stop solution for App development, testing, operation & maintenance
Realizing comprehensive risk
management such as:
Marketing protection
Account protection
Transaction protection
Credit protection
Channel protection
Content protection
OceanBase
Financial-grade
i
i
distributed
is ri
relational
i
database developed by Ant
databa
Financial and Alibaba with online horizontal expansion capabilities
Sources: Ant public filings
Advanced Marketing
Build
il an online
li
and fflexible
i
marketing management platform
for financial institutions, including:
Customer insight
Event management
Channel push
Targeted delivery
Process automation
Marketing effect analysis
Marketing experiment
Event marketing
Creative center
Data as of 30th June 2020
150
88
Paul Schulte
Zhima Credit
Independent 3rd party credit agency under Ant Financial that uses cloud computing & machine learning
Credit Card
Renting
Consumer Finance
Travel
Schulte Research
Financial Leasing
Marriage
Hotel
Sources: Ant public filings
Classification
Data as of 30th June 2020
151
Schulte Research
Participate in all parts of life
Sources: Ant public filings
152
How to get a loan in 3 seconds
Schulte Research
Credit line approval, drawdown, and repayment process
Sources: Ant public filings. Schulte Research
153
89
M O N E Y M E TAV E R S E
SME Credit risk management
Schulte Research
Process for SME lending
Sources: Ant public filings. Schulte Research
154
Services for partner Asset managers & Insurers
Value-added services powering asset management and insurance partners
Infrastructure for asset management
Ant leverages customer insights and massive
user base to enable partner asset managers:
To distribute simple, low-investment threshold,
and easy-to-understand investment products
for customers
Partner Asset Managers
Product Design
Product
Screening
Partner Asset Managers
Customer
Acquisition /
Education
Investment
Advisory
Interactive
Communication
Product Delivery
Infrastructure for insurance
Ant leverages deep customer insights, risk
management solutions, and technology to
enable partner issuers to:
+ Partner Insurers
Schulte Research
1. Acquire customers at scale and at low cost
Partner Insurers
2. Co-innovate products
3. Improve underwriting capabilities through
enhanced customer selection and pricing
Customer
Education /
Acquisition
Product Design
Underwriting
(Customer
Selection)
Claim
Solvency
Requirement
Product Delivery
4. Improve claims management through service
automation and fraud detection systems
Sources: Ant public filings. Schulte Research
155
Global Partnership & Investments
Independent 3rd party credit agency under Ant Financial that uses cloud computing & machine learning
List of global partnerships & investments1
US
Delta Air Lines
EyeVerify
First Data
Marriott international
Stripe
Uber
United Airlines
V-Key
VeriFone Systems
UK & Ireland
InterContinental Hotels Group
Premier Tax Free
Schulte Research
Germany & France
Ingenico Group
PrestaShop
Worldline
Concardis
Wirecard
Singapore, India & Thailand
Alpha Payments Cloud
Grab
Resorts World Sentosa
Paytm
Ascend Money
Paysbuy
Sources: Ant public filings Data as of 30th June 2020
(1) Please note that words highlighted in blue indicate a partnership & words highlighted in orange indicate an investment
90
South Korea & Japan
Bankware Global
Orix
156
Paul Schulte
Schulte Research
Section 4: Acorns & Trustly
157
Acorns
Schulte Research
Case Study
158
Case study 19 – Acorns
Company Overview
Unsustainable fees for low-account investors; very attractive fees for high AUM at the expense of quality investment products
Business model
Go-to-market strategy
Micro-investing platform, investing spare change in a basic diversified
portfolio
Marketing efforts to reach
scalability rather than R&D to enhance product differentiation
Subscription-based pricing with three membership levels:
Famous brand ambassadors and celebrity investors (e.g., The Rock, Jennifer
Lopez)
1. Lite (US$1 per month): investment account in ETFs (individual stock
picking not supported)
Going public brings visibility, in line with current marketing efforts
Focuses heavily on millennial investors
2. Personal (US$3 per month): adds Retirement account and
Checking account
Continue M&A momentum to drive growth, following acquisition of Harvest
and Pillar recently
3. Family (US$5 per month): adds Investment account for kids
Goals
Limitations
Lack of product differentiation, competitors (e.g., SoFi) provide ecosystem of
financial services alongside robo-advisory, micro-investing services, access
to stocks trading
Investing, spending, and saving financial products and services
Schulte Research
Spare change and micro-investments in basic ETFs, customers select either
Core Portfolio (e.g., Core S&P, Vanguard 500, U.S. Bonds ETFs) or ESG
Portfolio with chosen level of risk
High fees for low account balance, not sustainable for targeted customer
base
Investment accounts for Retirement, Children
Attract and retain customers, especially to higher subscription tiers
Increase ARPU through additional products and services
Easy to replicate and integrate products and services for competitors
Create complete money management solution
Optimistic US$42 ARPU in 2023E projected by Management
Sources: Acorns public filings, TechCrunch, Investopedia
159
91
M O N E Y M E TAV E R S E
Funding since inception
Acorns SPAC pre-mature and would be sensible in 2022
2023
Amount raised, lead investors, and post-money valuation
In need of immediate financing to sustain negative operating cash flows in the future, SPAC proceeds fixes financing issues
High quality investors including Blackrock, Wellington Management, and PayPal
Post-money valuation
Amount raised
$3m
$16m
$23m
$67m
$50m
$105m
$623m
20-May-13
25-Sep-14
15-Apr-15
20-Jul-17
9-May-18
28-Jan-19
27-May-21
Schulte Research
$2,200m
$860m
$418m
$8m
$16m
$83m
$236m
Series A
Series B
Series C
Series D
Private Equity
Series E
SPAC (pending)
Sources: CB Insights, Crunchbase Pro
160
Competitive landscape
Competitors are better aligned on all fronts
Minimum Investment
from asset classes availability, to fees at different AUM
Fee Structure
Investment Funds
$1 – $3 – $5 monthly subscriptions
ETFs
$500
First $5,000 free, 0.25% AUM over
ETFs from stock, bond, real estate & natural
resources/energy asset classes
Low fee digital investment portfolio
Tax-loss harvesting, larger pool of ETFs
ETFs
Goal-based automated investment advisors
Tax-loss harvesting, access financial advisors, larger pool of
ETFs
6,000 stocks and ETFs
Schulte Research
Free robo-advisor, premium plan for sophisticated investors,
access to stocks and larger pool of ETFs
No minimum – $100 for Betterment
0.25% AUM up to $2 million
Premium
Schulte Research
Notes
$5
$100
$0 – $125 per year for M1 +
$500
0.24% AUM
ETFs, and other asset classes
$1
$0
ETFs, stocks
Large suite financial products
Individual stock picking with SoFi Invest, access to lending
products
Aimed for sophisticated investors, access to dedicated
financial advisor, analysis, recommendations, tax-loss
harvesting
Automated investment management, tax-loss harvesting,
slightly larger pool of asset classes
$100,000
0.79% at $100,000 to 0.49% at $10,000,000
Stocks, ETFs, Fixed income and Private Equity
for private/qualified investors
$3,000 Digital Advisor – $50,000
Personal Advisor
0.15% AUM Digital – 0.30% AUM Personal
Advisor
Digital: Vanguard ETFs; Personal Advisor: Stock Digital for low fee digital investment portfolio management
& bond mutual funds and ETFs
Premium for sophisticated investors
$5,000 for Schwab Intelligent $25,000 for Premium
$0 for Basic – $30 monthly for Premium
Stocks, bonds, real estate & precious metals
ETFs
$0
Free up to $10k – $3 per month up to $50k Mutual funds/ETFs
0.35% AUM over
-Advisor Pros, SoFi, Investopedia
Intelligent for low fee digital investment portfolio
management
Premium for sophisticated investors
Free for low-balance accounts, increases with AUM
Larger pool of ETFs/Mutual funds
161
92
161
Paul Schulte
Low-account balance AUM fees across
competitors
Acorns compared to similar robo-advisory1 fees breaks even for medium AUM ($4,800 for $1 Tier)
Management fees for robo-advisory services as percentage of Assets Under Management for low-balance accounts (US$500
5,000)
14.00%
12.00%
SoFi Investing and M1 Capital2 not represented:
0% fees for robo-advisory services
10.00%
8.00%
6.00%
4.00%
Acorns $1 drops below 0.25% AUM fee
Betterment, Wealthfront, Axos Invest offer ~0.25% fee
Schulte Research
2.00%
0.00%
$500
$1,000
Acorns $1
Acorns $3
$3,000
Acorns $5
-Advisor Pros, SoFi, Investopedia
(1) Robo-advisory services targeting same customer segments (i.e., beginner investors, millennials)
(2) M1 Capital Premium at $125 per year, designed for more sophisticated investors.
Wealthfront
Betterme nt
$5,000
Vanguard Digital Advisor
e.g., Betterment, Wealthfront, Axos Invest
162
162
High-account balance AUM fees across
competitors
Acorns1 subscription-fees model gains interest at medium-high AUM
Management fees for robo-advisory services as percentage of Assets Under Management for high-balance accounts (US$10,000
1,000,000)
1.40%
1.20%
SoFi Investing and M1 Capital2 not represented:
0% fees for robo-advisory services
1.00%
0.80%
0.60%
Acorns $3 drops below 0.25% AUM fee at $14,400
Acorns $5 drops below 0.25% AUM fee at $24,000
0.40%
Schulte Research
0.20%
0.00%
$10,000
$25,000
$50,000
Acorns $5
Wealthfront
$100,000
Betterme nt
Axos Inve st
-Advisor Pros, SoFi, Investopedia
(1) Acorns $1 not represented
(2) M1 Capital Premium at $125 per year, designed for more sophisticated investors.
$250,000
Vanguard Digital Advisor
$500,000
$1,000,000
Fidelity
163
93
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Trustly
Schulte Research
Case Study
164
Case study 20 – Trustly
Company Overview
Leading A2A platform in the EU, expanding in the US
Business model
Go-to-market strategy
Leading digital account-to-account (A2A) payments platform in Europe
Key verticals: Gaming, Financial Services, e-Commerce, Travel
Bypasses traditional card-based payments value chain
Sales channel primarily indirect through collecting PSPs, technical PSPs,
Checkout Solutions, and Platform Providers
Offers merchants a more direct solution resulting in lower fees and reduced
transaction costs
Under PSD2, Trustly can now access current accounts directly and initiate
credit transfers more securely using open APIs provided by banks
Online banking payments leveraging Open Banking trend in Europe (PSD2)
EU-centred regulations has global reach, with US-based banks and Fintechs
forced to make changes to comply with EU laws
Instant payment facilitates open payments, embracing regulators that are
pushing for more competition creating a standardized market with low
barriers to entry
Limitations
Goals
End-to-end payments solution by offering a consumer-facing payment
method, enabling merchant acceptance and operating proprietary
payment network
Market-driven approach to Open Banking in the US, limiting international
expansion until all banks provide open APIs to leverage Trustly capabilities
Fragmented US market of c.11,000 financial institutions and US banks are not
required to make publicly available APIs
Schulte Research
Use cases in A2A, B2C, P2P, B2B, C2B, and B2C
Develop better digital services, increase customer personalization, and
reduce costs of customer acquisition
Slow modernization of IT systems internationally
Competes with screen scraping methods outside of the EU
Increasing direct competition in the EU (e.g., Klarna, iDeal), in the US (e.g.,
Plaid), and payments incumbents players (e.g., Visa acquisition of tink in Q2
2021)
Sources: Trustly public filings, TechCrunch, Financial Times, Pymnts, Credit Suisse, Worldpay, Aite Group & Juniper Research, Deloitte, Everyday Bank Research, Federal Reserve
165
Funding since inception
Amount raised, lead investors, and post-money valuation
Private Equity: Nordic Capital buyout c.70% in 2018, BlackRock and Investment Corporate of Dubai with minority investment in 2020
IPO:
Post-money valuation
Amount raised
$30m
24-Sep-11
4-Nov-14
14-Mar-18
10-Jun-20
$1,000m
Schulte Research
$865m
Seed
VC
PE Buyout c.70%
Minority
Sources: CB Insights, Crunchbase Pro
166
94
Chapter 3:
Insurtech and blockchain
Section 1: Isolated examples of sensible strategy in a sea of undercooked and immature businesses, exorbitant valuations, and zero blockchain technology.
On fundamentals, Amwell and Oscar seem to be doing the right thing at the right
time. Rapid buildout of sensible, comprehensive platforms. The rest are high-risk
strategies that are premature money pits with outsourced technology and are bogged
down in regulatory uncertainty.
Bright is a high-risk play but might eventually get it right. It has the potential to
gain traction in customer retention and drive revenue. Lemonade is awful from a fundamental and technical point of view. Ping An has been beaten to a pulp by regulatory
uncertainty inside China. This seems unjustified.
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players
NFT
Intellectual property
Crypto
Fintech
Property
Money
Insurance
Art/Wine/Sports
NFTs
Gaming
Rewards and incentives
China key players
Insurtech
Proptech
Risks
Schulte Research
Monopoly behavior
Antitrust hindering
development
Railroads Required
Blockchain (e.g., BSN)
Central Bank Digital Currency
Incentives to develop
proprietary technology
Fragmented data
Public trust
Sources: Schulte Research
168
Figure 79
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M O N E Y M E TAV E R S E
Section 2: Insurtech in a broader context and the thinking behind it. Insurtech is a
vital part of how fintech, crypto, and proptech create the NFT metaverse – Figure 79.
Business models: Insurtech or digital distribution channel?
5 key business models focused on injecting vitality into the insurance ecosystem
Direct Insurers
Insurance Management
Offer personalized, flexible,
and cost-efficient products
with lower coverage and
premiums
Tracking and administration
of all insurance policies and
contracts in one place
Tech utilization:
Marketplaces
Sales, Marketing &
Engagement
gag
P2P
Online platforms with
insurance products and
providers
Allows users to team up and
consolidate their premiums
together
Offer services to third
parties such as brokers and
insurers
Allows users to compare
prices and terms
Gives users hedge against
risk as well as derive
benefits regarding premium
proceeds
APIs or SaaS offerings to
improve the insurance
value chain
IoT
Big Data
Leads to fairer pricing and
better user experience
Schulte Research
Primarily digital distribution
channels
Sources: DashDevs
Introduction to Insurance
169
Figure 80
Insurtech is primarily creating a solution where there are already solutions. That’s
the problem. Innovative Insurtech is creating quasi-analog solutions for physical
problems using off-the-shelf primitive digital technology. Why isn’t Insurtech creating digital solutions for digital issues? Cyber security? Crypto security? NFT security?
Blockchain systems security? Government CBDC or ID systems security? See Figure
80 for the solutions. Pure Insurtech should live in the digital world of IoT and pure
digitized platforms. Only Ping An does this.
Goals & limitations: cheap, easy, now ideal plagued on
both ends of insurance value chain
Intend to solve pain points at both ends of the insurance value chain, but political risk at the crossroad of China & West
Goals
Key limitations
Insurtech intends to solve issues at both ends of the insurance value chain
through a Cheap, Easy, Now ideal:
Political risk, especially in China
Insurtech
Insurer pain points
Low user satisfaction
Fraud and fraud related losses
High enterprise integration costs
Poor profitability
High loss ratios
Customer pain points
Standardized business models
Cumbersome and inefficient
settlement process
Market saturation
Misleading sales as a result of
poor quality agents
Lack of proprietary technology
Difficult to understand product
terms
Late to blockchain party
Schulte Research
GOALS
One superapp
Personalized offerings
Scandals
Fraud prevention
Streamlined process
Misleading business models
Sources: Schulte Research
173
Figure 81
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Paul Schulte
The rest are half in and half out. They are clearly not O2O. Figure 81 shows the
limitations of this business model. They are clinging to a physical/analog world of
powerful entrenched incumbents moving into the O2O world from the purely physical side. Insurtech startups will lose in this battle to monoliths that can adapt digitally.
Insurtech lacks blockchain strategies and proprietary technology readily available to
the incumbents. These Insurtech stocks also have high loss ratios while the incumbents have decades of retained capital to pour into new strategies.
Business models & customer segment: INSURTECH IS NO
DIFFERENT THAN THE BIG INSURANCE MONOLITHS
Global Insurtech showing primary focus on P&C business line & Personal customer segment
Global Insurtech focus by line of business, 2020
P&C
Health
Global Insurtech focus by customer segment, 2020
Life
Personal
16%
Corporate
SME
26%
47%
18%
66%
Schulte Research
27%
Sources: CB Insights, Dealroom, McKinsey Global Insurance Pools Insurtech Database
170
Figure 82
New technologies for the Insurtech startups should be innovative leapfrogging –
not half-baked off-the-shelf technology that quasi-competes with the big boys. Figure
82 proves the point – the lines of business and customer segmentation of Insurtech
are identical to a diversified traditional insurance company. Myriad digital insurance
opportunities are waiting. For instance, Envelop is an example of true Insurtech in
that it is a new digital reinsurance model for digital cybercrime. Can any of the leading Insurtech companies say the same thing? For instance, crypto will become mainstream (and CBDC with it) the minute there is a private sector solution with (likely)
state-subsidized insurance for it. This is the real opportunity here. Who among these
Insurtech firms is ready?
How Insurtech can command the purely digital world of wearables, smart homes,
and smart cities – rather than be a half-baked bridge between traditional insurance
products for physical activity – will be the key. The mystery of all this is why Apple
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M O N E Y M E TAV E R S E
and Google are so timid about Insurtech and wearables (are they afraid of regulators
and anti-monopoly reprisals?).
The Connected World IoT powering data capabilities
for insurance. BLOCKCHAIN is the perfect solution
Over 6x more devices than humans expected in 2025E, enabling faster & more efficient data capabilities for insurance
Networked devices
Global population
More devices than people since 2008
50 bn
Includes wearables, smart appliances and telematics
Helps insurers monitor driving habits, health, household issues, etc.
Ensures best risk assessment and pricing
25 bn
Schulte Research
13 bn
6 bn
7 bn
7 bn
2010
2015
8 bn
1 bn
2003
Sources: DashDevs
2025E
Introduction to Insurance
174
Figure 83
In any event, Figure 83 shows the coming explosion in connected devices and the
open field running, which a pure Insurtech play can command. Again, Envelop is one
of the only cases we see. Apple and Google are the others, but they are mysteriously
in radio silence at the moment.
Early-stage Robotic Process Automation (RPA)
Huge potential to disrupt the insurance industry
however, still an early-stage technology with lack of successful adoption
Insurance use cases of RPA:
Accelerate onboarding
Underwrite policy renewals
Business Impact
Autonomous RPA
Unassisted RPA
Early stage assisted RPA
Improve productivity
Partial automation
Difficult to scale
Schulte Research
Cognitive RPA with AI
Handle claims
High
Sources: Imaginea
End-to-end automation
Auto-scaling
End-to-end automation
Context aware
Easy to scale
Processing of
unstructured data
Predictive and
prescriptive analytics
Automation of tasks that
involve judgement
Advanced workflow
analystics
Work orchestration
Robot performance
analytics
Market Adoption
Low
Accenture
171
Figure 84
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Paul Schulte
Figure 84 shows the potential for Insurtech. We are in a world of automation of activities, which is scalable and offers analytics. The next part of this is a
more complex world of auto-scaling, context awareness, and advanced workflow
analysis. The currently listed entities have mostly off-the-shelf technology with
primitive understanding. Again, this is likely due to the “strike while the iron’s
hot” IPO action rather than listing when the technology is ready. We will see in
the next section that much of the current wave of Insurtech lacks the very foundation of digitized insurance of “moving” people, places, things, and ideas —
blockchain identity. I worry that they have gone too far down the rabbit hole
of insurance-lite products with off-the-shelf technology rather than focusing
on the next chapter of insurance based on blockchain technology. This is how
blockchain will (or already has) created a new digitized world that is utterly
bereft of insurance products.
BOTTOM LINE: Blockchain confirms identity, so we need digital theft insurance (for cases like blackmail and kidnapping). It confirms trades, so we need
digital fraud insurance. It confirms property ownership, so we need digital property
insurance. It confirms intellectual property, so we need digital insurance remedies
for corporates, patents, trademarks & copyrights. It confirms smart contracts, so
we need insurance for digital breaches of smart contracts. And blockchain CBDC
will require a vast new market for digital insurance for sovereign CBDC distribution (counterfeit insurance), store of value (deposit insurance), means of exchange
(fraud and larceny). This is the real Insurtech that the world craves. It is nowhere in
the current crop of Insurtech. My real worry is that by the time this generation of
Insurtech makes the transition from a “half in and half out” approach involving offthe-shelf digital solutions to physical harms, they will have missed the boat when it
comes to the purely digital world of blockchain-based solutions. This is true terra
incognita where there are NO incumbents. Entities like Sygnum and Silvergate are
quickly filling this void.
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M O N E Y M E TAV E R S E
Section 3: China is miles ahead in blockchain but is struggling with the rights of
private companies versus the need for the state to protect consumer behavior traits,
digital currency, and health data. Who is responsible for this if something goes wrong,
and who will pay out claims?
Poor blockchain traction globally: A blind spot for the
West
Cybersecurity, big data & analytics identified as top priority investment, blockchain identified as low priority1
Deloitte global financial services survey 20201
Expect large increase in spend
Robotic process automation
7%
Bloc kchain
12%
AI
12%
Digital channels
12%
Data analytics
12%
27%
28%
Expect large decrease in spend
36%
14%
27%
42%
20%
29%
48%
19%
Blockchain
Negative
consensus
2%
16%
35%
40%
1%
25%
38%
37%
7%
25%
34%
34%
18%
Cybersecurity
Expect slight decrease
36%
17%
Cloud computing & storage
Expect no change
29%
13%
Data privacy
Schulte Research
Expect slight incre ase in spend
23%
2%
3%
2%
11%
14%
3%
Big Data
Positive
consensus
2%
Sources: Deloitte Center for Financial Services Global Outlook Survey 2020
(1) Survey predominately focused on western companies
172
Figure 85
Blockchain is a big blind spot in the West. Look at Figure 85. Lots of companies
will spend on cybersecurity, cloud, AI, and data analytics. Only 39% of firms said
they are increasing spending on blockchain, while 70% are increasing spending on cybersecurity. This makes no sense as blockchain offers so many solutions to paper-based
systems with unsecured Excel or disparate data systems sitting around.
Blockchain use cases in insurance
Digital ledger to streamline & increase transparency in the insurance process
US lag behind in blockchain utilization
On-demand insurance
Fraud detection
Record keeping functionalities for
quick on-demand services for policy
holders
Transactions are permanent and
timestamped
Prevents false claims
Structure data
Microinsurance
Collect more valuable data through
many connected devices
Manage data on a P2P basis
Store and process data
Parametric platform meaning fewer
local agents are needed
Reinsurance
Transparency & trust
Schulte Research
Protects insurers when a large
volume of claims are received
Customers understand what data
insurers have on them
Verify claims automatically through
third party personal devices
Blockchain in China: smart cities, autonomous cars, and drones are the next three to tackle when it comes to insurance
Internet of Things
Edge computing
Wearables
Blockchain
Sources: Mantra Labs
181
Figure 86
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Paul Schulte
Figure 86 shows blockchain uses in insurance. Blockchain offers transparency, authenticity in storage, and security involving large volumes of claims or record-keeping. It bypasses human error as well as malicious human behavior. And it
is a two-way affair for customers to understand the data insurers have on them and
vice versa.
Figure 87
Figure 88
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M O N E Y M E TAV E R S E
Figure 89
Figure 90
102
Paul Schulte
Figure 91
Figure 92
103
M O N E Y M E TAV E R S E
Drone powered solutions
Drone use gaining traction in the Insurtech industry, providing multiple cost saving & insurance process benefits
Present use of commercial drones
Drone use cases
Industrial inspec tion
Insuranc e
Agriculture
Risk engineering & pricing
Pre-loss
Real e state/Aerial photography
State & loc al government
Natural disaster monitoring
4%3%
17%
Inspection
48%
Risk assessment
Schulte Research
Post-loss
28%
Claims adjudication
Projected savings of c.US$ 7bn for the
insurance industry with principal application in
property insurance
Sources: FAA, Deloitte
De
Fraud prevention
Drone Use by Insurance Industry
r is Flying Higher
ry
1
Figure 93
Regulation framework
Global AI, Big Data & analytics regulatory crackdown
Regulatory tailwinds
Regulatory headwinds
China:
China:
Mass Entrepreneurship & Innovation Campaign: Initiative introduced by
Chinese government to incentivize entrepreneurs to drive technology
innovation
Online insurance: revised rules following concerns of improper collection,
usage and selling of user data without authorisation
Crackdown on Chinese companies listing in US, forcing them to list in HK
Insurtech was a key industry attracted to this
Antitrust: China getting serious as it ramps up efforts to crackdown on anticompetitive behaviour
Chinese government has played a critical role in supporting the integration
of tech and data analytics in the Chinese tech ecosystem:
US:
Mid 2018-2019 stimulus
Biden executive order on competition: expect increased merger scrutiny,
and increased focused on collection and use of sensitive personal
information
Accommodative monetary conditions targeted to private sector
NAIC in process of finalizing white paper on the role of chatbots and AI in
the distribution of insurance
Schulte Research
Supports a flurry of activity in the SME space, which will help mid-cap
Insurtech thrive with a plentiful availability of strategic partnerships
CASTF adopted white paper on regulatory review of predictive model
AUWG working on regulatory framework regarding use of external data and
analytics in accelerated life underwriting
Principles of AI
Fair & ethical, accountable, compliant
Transparent, secure, safe & robust
Sources: iResearch, insurancejournal, The White House
24
Figure 94
Figure 87 to Figure 94 offer a glimpse into the advanced nature of Insurtech.
China’s data growth is exploding Figure 89. Ping An as well as a few others have
access to a vast trove of blockchain-based data. This is part of the problems that the
West will surely face soon — the role of government when a few privately held companies know everything about everybody. As IoT and edge technology hook up with
wearables and are sorted via blockchain, truly powerful new industries will be born.
Blockchain-based genetics and smart car technology are coming soon. The next big
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Paul Schulte
area for Insurtech will be what drones can and can’t do. This is where open field running can take place and where the multi-billion dollar companies will come from.
Lastly, in Figure 94, we lay out the regulatory framework for China and see how the
US will respond.
Section 4: Additional research in PowerPoint format.
Schulte Research
Chapter III: Insurtech and Blockchain
167
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players
NFT
Intellectual property
Crypto
Fintech
Property
Money
Insurance
Art/Wine/Sports
NFTs
Gaming
Rewards and incentives
China key players
Insurtech
Proptech
Risks
Schulte Research
Monopoly behavior
Antitrust hindering
development
Railroads Required
Blockchain (e.g., BSN)
Central Bank Digital Currency
Incentives to develop
proprietary technology
Fragmented data
Public trust
Sources: Schulte Research
168
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M O N E Y M E TAV E R S E
Business models & customer segment: INSURTECH IS NO
DIFFERENT THAN THE BIG INSURANCE MONOLITHS
Global Insurtech showing primary focus on P&C business line & Personal customer segment
Global Insurtech focus by line of business, 2020
P&C
Health
Global Insurtech focus by customer segment, 2020
Life
Personal
16%
Corporate
SME
26%
47%
18%
66%
Schulte Research
27%
Sources: CB Insights, Dealroom, McKinsey Global Insurance Pools Insurtech Database
170
Early-stage Robotic Process Automation (RPA)
Huge potential to disrupt the insurance industry
however, still an early-stage technology with lack of successful adoption
Insurance use cases of RPA:
Accelerate onboarding
Underwrite policy renewals
Cognitive RPA with AI
Business Impact
Handle claims
Autonomous RPA
Unassisted RPA
Early stage assisted RPA
Automation of tasks that
involve judgement
Context aware
Advanced workflow
analystics
Work orchestration
Robot performance
analytics
Difficult to scale
Schulte Research
Predictive and
prescriptive analytics
Auto-scaling
Easy to scale
Partial automation
Market Adoption
High
Sources: Imaginea
End-to-end automation
End-to-end automation
Improve productivity
Processing of
unstructured data
Low
Accenture
171
Poor blockchain traction globally: A blind spot for the
West
Cybersecurity, big data & analytics identified as top priority investment, blockchain identified as low priority1
Deloitte global financial services survey 20201
Expect large increase in spend
Robotic process automation
23%
Bloc kchain
12%
AI
12%
Digital channels
12%
Data analytics
12%
Data privacy
Schulte Research
7%
Cloud computing & storage
Cybersecurity
Expect slight incre ase in spend
Expect no change
Expect slight decrease
Expect large decrease in spend
29%
36%
27%
36%
28%
34%
34%
13%
17%
18%
14%
27%
42%
20%
29%
48%
19%
Blockchain
Negative
consensus
2%
16%
35%
40%
1%
25%
38%
37%
7%
25%
2%
3%
2%
11%
14%
3%
Big Data
Positive
consensus
2%
Sources: Deloitte Center for Financial Services Global Outlook Survey 2020
(1) Survey predominately focused on western companies
172
106
Paul Schulte
Goals & limitations: cheap, easy, now ideal plagued on
both ends of insurance value chain
Intend to solve pain points at both ends of the insurance value chain, but political risk at the crossroad of China & West
Goals
Key limitations
Insurtech intends to solve issues at both ends of the insurance value chain
through a Cheap, Easy, Now ideal:
Political risk, especially in China
Insurtech
High loss ratios
Standardized business models
Customer pain points
Insurer pain points
Low user satisfaction
Fraud and fraud related losses
High enterprise integration costs
Poor profitability
Cumbersome and inefficient
settlement process
Market saturation
Misleading sales as a result of
poor quality agents
Lack of proprietary technology
Difficult to understand product
terms
Late to blockchain party
Schulte Research
GOALS
One superapp
Personalized offerings
Scandals
Fraud prevention
Streamlined process
Misleading business models
Sources: Schulte Research
173
The Connected World IoT powering data capabilities
for insurance. BLOCKCHAIN is the perfect solution
Over 6x more devices than humans expected in 2025E, enabling faster & more efficient data capabilities for insurance
Networked devices
Global population
More devices than people since 2008
50 bn
Includes wearables, smart appliances and telematics
Helps insurers monitor driving habits, health, household issues, etc.
Ensures best risk assessment and pricing
25 bn
Schulte Research
13 bn
6 bn
7 bn
7 bn
2010
2015
8 bn
1 bn
2003
Sources: DashDevs
2025E
Introduction to Insurance
174
Development trend of Insurtech: THE FUTURE OF
INSURTECH POINTS DIRECTLY AT BLOCKCHAIN
Insurtech moving into the digital & intelligence age
Internet + Insurance
Digital + Insurance & Intelligence + Insurance
Gene Technology
Smart Driving Tech
Wearables
5G & IoT
Smart claims
Big Data, AI & Blockchain
Schulte Research
Mobile Internet
PCE Networks
Smart customer service
Automatic underwriting
2000
2016
NOW
Sources: iResearch Insurtech 2020 Report
175
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M O N E Y M E TAV E R S E
Schulte Research
Section 1: China Blockchain it is already there with
edge computing, EV, drone, and smart cities
176
China far outpaces the US on blockchain capabilities
and applications
China investing huge resources into blockchain whilst the US is behind
Number of global blockchain patent applications, 20191
China insurance blockchain R&D investment projected growth
Data in US$ m
1,505
$93 bn
CAGR: 26%
Chinese companies issued
largest number of
blockchain patent
applications in 2019
$80 bn
$66 bn
$46 bn
724
561
402
Schulte Research
282
Alibaba/Alipay
baba/A
/ lip
/A
Te nc ent
Ping An
nChain
WeBank
2019
2020
2021E
2022E
Sources: iResearch Insurtech 2020 Report
(1) WeBank is founded by Tencent
177
China online insurance explosion
Insurtech influencing the Chinese online insurance market, supported by a rapid uptick in digitization and online payments
Chinese online insurance market concentration
Chinese online insurance market growth
Data in US$ bn
Consolidated
market dominated by small number of key players
CAGR: 41%
$440 bn
Schulte Research
China online insurance market
$79 bn
Fragmented
competitive market without dominated players
2019
Sources: Mordor Intelligence, Fitch Ratings
PitchBook
Digital Transformation of Chinese Insurers, Qichacha, Allianz
2024E
Is China Winning the Insurtech Race?, BCG FinTech Control Tower,
178
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Paul Schulte
AI, ML, and Big Data to improve margins in insurance
Chinese data volume growth is an attractive opportunity for early-stage Insurtech companies
Chinese insurance AI investment projected growth
Chinese data volume growth
Data in US$ bn
Data in Zettabyte (ZB)
48.6
CAGR: 30%
$1,465 bn
CAGR: 29%
$1,093 bn
$839 bn
$663 bn
$535 bn
7.6
2018
2019
2020
2021E
2022E
2018
Global Insurtech technology utilization breakdown
20%
Big Data & AI
13%
Usage-based ins urance
19%
12%
IoT
Schulte Research
2025E
Where are global insurers focusing AI implementation?
10%
Gami-fication
43%
Product innovation
10%
Robo-advis ory
Process optimization
58%
Customer experience
4%
P2P
Bloc kchain
4%
3%
Micro-insurance
Sources: iResearch Insurtech 2020 Report
179
System model of an Insurtech blockchain
Blockchain framework enables multiple processes between different parties by starting, maintaining & executing policies
Client sends request to agent
Insurance company
Claim
Issue policy
Registration
Schulte Research
Agent submits request to blockchain network
Client’s request is completed
Sources: IEEE Xplore
example of an insurance based blockchain system
180
Blockchain use cases in insurance
Digital ledger to streamline & increase transparency in the insurance process
US lag behind in blockchain utilization
On-demand insurance
Fraud detection
Record keeping functionalities for
quick on-demand services for policy
holders
Transactions are permanent and
timestamped
Prevents false claims
Structure data
Microinsurance
Collect more valuable data through
many connected devices
Manage data on a P2P basis
Store and process data
Parametric platform meaning fewer
local agents are needed
Reinsurance
Transparency & trust
Schulte Research
Protects insurers when a large
volume of claims are received
Customers understand what data
insurers have on them
Verify claims automatically through
third party personal devices
Blockchain in China: smart cities, autonomous cars, and drones are the next three to tackle when it comes to insurance
Internet of Things
Edge computing
Wearables
Blockchain
Sources: Mantra Labs
181
109
M O N E Y M E TAV E R S E
Drone powered solutions
Drone use gaining traction in the Insurtech industry, providing multiple cost saving & insurance process benefits
Present use of commercial drones
Drone use cases
Industrial inspec tion
Insuranc e
Agriculture
Risk engineering & pricing
Pre-loss
Real e state/Aerial photography
State & loc al government
Natural disaster monitoring
4%3%
17%
Inspection
48%
Risk assessment
Schulte Research
Post-loss
28%
Claims adjudication
Projected savings of c.US$ 7bn for the
insurance industry with principal application in
property insurance
Sources: FAA, Deloitte
De
Fraud prevention
Drone Use by Insurance Industry
r is Flying Higher
ry
182
Regulation framework
Global AI, Big Data & analytics regulatory crackdown
Regulatory tailwinds
Regulatory headwinds
China:
China:
Mass Entrepreneurship & Innovation Campaign: Initiative introduced by
Chinese government to incentivize entrepreneurs to drive technology
innovation
Online insurance: revised rules following concerns of improper collection,
usage and selling of user data without authorisation
Crackdown on Chinese companies listing in US, forcing them to list in HK
Insurtech was a key industry attracted to this
Antitrust: China getting serious as it ramps up efforts to crackdown on anticompetitive behaviour
Chinese government has played a critical role in supporting the integration
of tech and data analytics in the Chinese tech ecosystem:
US:
Mid 2018-2019 stimulus
Biden executive order on competition: expect increased merger scrutiny,
and increased focused on collection and use of sensitive personal
information
Accommodative monetary conditions targeted to private sector
NAIC in process of finalizing white paper on the role of chatbots and AI in
the distribution of insurance
Schulte Research
Supports a flurry of activity in the SME space, which will help mid-cap
Insurtech thrive with a plentiful availability of strategic partnerships
CASTF adopted white paper on regulatory review of predictive model
AUWG working on regulatory framework regarding use of external data and
analytics in accelerated life underwriting
Principles of AI
Fair & ethical, accountable, compliant
Transparent, secure, safe & robust
Sources: iResearch, insurancejournal, The White House
183
110
Paul Schulte
Schulte Research
Section 2: US corporate
184
Metromile
Schulte Research
Case Study
185
Case study 21 – Metromile
111
M O N E Y M E TAV E R S E
Company overview: impressive telematics but zero
blockchain
Unproven business model with no future positive margins to back current trading multiples
Business model
Go-to-market strategy
Focused on building brand recognition in large US markets and penetrating
new markets in 2021
Pay-per-mile model composed of two key elements: Base rate and Per-mile
rate
Targets low-mileage drivers through a multitude of methods:
Initially determined using typical demographic factors (age, driving history,
credit, etc.)
Individualized plans
Base rate + (per-mile rate ! miles driven) = premiums paid by consumers
Higher savings
Additional services are offered through app
Unique value propositions such as parking ticket warnings
2019: Developed division offering cloud-based SaaS to legacy insurers
Leverage data to lower costs and increase efficiency on pricing
May 2021: changed reinsurance setup leading to a decrease in revenue
Goals
Limitations
One superapp: offer real-time digital pay-per-mile auto-insurance through
one mobile app
Market saturation: saturated auto pay-per-mile insurance market
No reinsurance coverage
Schulte Research
Fraud protection: reduce inefficiencies for customers in how they are
charged for car insurance
Tech transparency: UC Berkley researchers found OBD2 devices could be
used to hack car braking systems
Easy claims: improve digitization within the space to replace outdated and
slow auto-insurance claims process
Political risk: potential pushback from legislators on 24/7 real-time data
collection, analysis, and data privacy
Increase insurance coverage with independent agents via commissions
(lower margins for Metromile)
Blockchain: no evidence of blockchain utilization
Sources: Crunchbase, Metromile public filings
186
Funding since inception
Sufficient funding entering 2022 to sustain continuous operating losses – Avoid
Amount raised, lead investors, and post-money valuation
Funding: strong and consistent funding history raising a total of US$463 m
M&A activity: Recently completed SPAC transaction by merging with INSU Acquisition Corp in Feb 2021, raising US$390 m
Post-money valuation
Amount raised
$4m
$10m
$40m
$96m
$93m
$390m
5-Dec-12
29-Apr-13
10-Feb-15
16-Feb-16
24-Jul-18
1-Feb-21
Schulte Research
$1,300m
$540m
$12m
$44m
Series A
Series B
Series C
Series D
Series E
SPAC (completed)
Sources: CB Insights, Crunchbase Pro
187
112
Paul Schulte
Amwell
Schulte Research
Case Study
188
Case study 22 – Amwell
Company overview: impressive integration but zero
blockchain
Teladoc Health better positioned on revenue, profitability, and growth at a relatively lower premium
Business model
Go-to-market strategy
growth driven by B2B partnerships and seamless digital experience
Provides subscription-based telemedicine platform to healthcare providers
that connects patients with medical professionals online
Began offering teleconference access through a subscription service
available to both D2C and other organisations
Platform allows clients to integrate telehealth into existing healthcare
offerings
2014: enabled patients to set up on-demand, video-enabled visits with
physicians, but rebranded version of D2C app same year by establishing
Offer services across healthcare spectrum including primary-care, urgent
care, high acuity speciality consults, and telepsychiatry
Going forward: Focus on subscription-based revenues, and develop
partnerships with Marquee Health systems and improve tech with Google
Amwell Converge as future key platform to drive both top line and bottom
line growth in the future
Goals
Limitations
Schulte Research
One superapp & seamless integration: offer telemedicine platform for
healthcare providers and system integrations to embed telehealth into
existing workflows
Growing net losses: net loss to revenue increased from 46% to 93% between
FY2018 H1 2020
Market potential: McKinsey study shows providers have seen between 50
175x as many telehealth visits as pre-COVID and 76% of customers are at
11% in 2019).
However, only 46% use telehealth
Streamlined process: remote healthcare is scattered and inefficient.
Patients and doctors also have no way of securely communicating
remotely
Develop Amwell Converge open architecture that can host and operate
applications from digital health companies
Sources: Amwell public filings
189
Funding since inception
Poor share price performance at -58.7% YTD, stabilizing at c.US$10 since May
Potential buy or buy Teladoc Health
Amount raised, lead investors, and post-money valuation
Funding: Raised a total of US$811 m from a well recognised investor base
M&A: completed acquisitions of Alinged Telehealth and Avizia in 2019 and 2018 respectively
Post-money valuation
Amount raised
$32m
$23m
$86m
$291m
$75m
$60m
$134m
$742m
12-Mar-07
23-Oct-08
7-Aug-15
26-Jun-16
17-Jul-18
16-Dec-19
20-May-20
17-Sep-20
Schulte Research
$3,963m
$93m
Series A
$260m
$267m
Series B
Series B-II
$505m
Series C
Series C-II
Series C-III
Series C-IV
IPO
Sources: CB Insights, Crunchbase Pro
190
113
M O N E Y M E TAV E R S E
Lemonade
Schulte Research
Case Study
191
Case study 23 – Lemonade
Company overview: B-list technology and zero
blockchain
Use AI software to offer property insurance, taking a fixed proportion of premiums and giving the rest to reinsurance & charity
Business model
Go-to-market strategy
Operates as a licensed carrier of insurance, retaining claims liability on its
own balance sheet
Launched in 2015 through offering property insurance products through a
mobile app with AI-powered capabilities
Uses AI capabilities, online functionalities, and B-Corp charity model to:
lower costs, increase transparency, and improve customer satisfaction
Initial aim: attract first-time, millennial renters & homeowners
–
B-Corp Model:
aimed at donating extra
transparency
25% of premium revenue for administrative costs and potential
profits
Began offering additional product lines in 2019/2020 such as pet and life
75% for customer claims, reinsurance and taxes/fees
Goals
Remaining goes to charities that customers choose
Limitations
B-Corp model: aimed at lowering costs, increasing transparency and
improve customer satisfaction
Schulte Research
Fraud prevention:
model
Low-tier proprietary technology: p
seem to drive down bottom line costs
Misleading business model: US$1.1 m donated in 2020, and with growing
reliance on reinsurance, profit margins are already low
-Corp
Increase number of product offerings: began offering additional lines in
2019/2020 such as pet and life insurance to diversify away from home
insurance
Poor customer retention: Q1 2020 hovered between 75%-76% (traditionally
around mid-80s)
Streamlined process: aim to use AI to create a customer journey with zero
paperwork and instant everything
Sources: Lemonade public filings
192
Funding since inception
Down -58.8% from its peak in early January, with maximum loss of -67.2% in May – Avoid
Amount raised, lead investors, and post-money valuation
Funding: Raised a total of US$480 m from a well recognised investor base
Post-money valuation
Amount raised
$13m
$13m
$34m
$120m
$300m
$319m
8-Dec-15
23-Aug-16
2-Dec-16
19-Dec-17
11-Apr-19
2-Jul-20
$2,000m
Schulte Research
$1,592m
$500m
$39m
$74m
$175m
Seed VC
Series A
Series B
Series C
Series D
IPO
Sources: CB Insights, Crunchbase Pro
193
114
Paul Schulte
Oscar Health
Schulte Research
Case Study
194
Case study 24 – Oscar Health
Company overview: decent technology stack but zero
blockchain
Pioneering full-stack healthtech platform, impressive investor backing & steady user growth
Business model
Go-to-market strategy
Use IPO proceeds to expand operations and restructure:
Offer D2C health plans to provide consumers with sound value propositions:
Proprietary 24/7 virtual care services
c.US$160 m of proceeds used to finance existing debt
Simplifies the health insurance purchasing process
Grow 24/7 in-house telehealth offering
Expand existing product offerings
Quick and easy claims processing
Teaming up with clinics and private insurers to create co-branded
insurance plans
First health insurance company to use full-stack tech platform enabling 24/7
telemedicine service at no extra cost and greater member engagement to
maximise customer retention
Schulte Research
Goals
Limitations
One superapp: there is no one-stop-shop or personalized experience
available due to poor data collection and analysis
Widening net losses: net loss increased to US$407 m in 2020 from US$261 m in
2019
Streamline process: insurance sites are cluttered and difficult to navigate
Saturated competitive landscape: IPO prospectus highlighted competitors
with broader scope of products that are more competitively priced and
have a larger network of partners
Scandals:
Sources: Oscar public filings
195
Funding since inception
-56.1% YTD, rebounding in the last couple weeks from US$12.2 low
High risk high reward opportunity
Amount raised, lead investors, and post-money valuation
Funding: Raised a total of US$1.6 bn from a well recognised investor base
Post-money valuation
Amount raised
$80m
$145m
$33m
$400m
$165m
$225m
$140m
!”#$$%&
14-May-14
20-Apr-15
15-Sep-15
22-Feb-16
28-Mar-18
26-Jun-20
17-Dec-20
3-Mar-21
Schulte Research
$7,923m
$3,200m
$2,700m
$800m
Series A
$1,500m
Series B
$1,750m
Series B-II
Series C
Series D
Series E
Series F
IPO
Sources: CB Insights, Crunchbase Pro
196
115
M O N E Y M E TAV E R S E
Root Insurance
Schulte Research
Case Study
197
Case study 25 – Root Insurance
Company overview: impressive telematics but zero
blockchain
Disappointing Q2 results, with declining growth expectations and increasing loss ratios, CTO and CPO leaving since IPO
Business model
Go-to-market strategy
Currently licensed in 36 states and active in 30
Deliver faster and cheaper auto-insurance through AI telematic screening
capabilities that:
Breadth over depth approach by focusing on expansion across US markets
through select M&A
Improve underwriting rate for auto-insurance through improved
data gathering and analysis capabilities during initial driving period
Partnership with Carvana since Q3 2021 (eCommerce platform for used
cars) to integrate auto insurance solutions
Minimise risk exposure
Allow customers to sign up in < 1 minute
Customer can manage policies, claims and support through app
Root transfer 70% of risk exposure to reinsurance, while remaining 30% is
retained by Root
Goals
Limitations
Schulte Research
Streamline process:
AI telematics screening & demographics for higher underwriting rate
High loss ratios: average around 70 79% (with certain geographies
exceeding 90%) poor compared to average traditional auto insurers (c.60
70%)
Pass off 70% of risk to reinsurers
Poor customer retention: low customer retention of c.54%
Customers sign up <1min
Political risk: Consumer Privacy Act and evolving attitudes on privacy may
revenue and
ability to underwrite
Superapp: customers can manage policy, claims and support within one
app
Sources: Root public filings
198
Funding since inception
Mix poor share performance and volatile trading, -60.2% YTD
Avoid
Amount raised, lead investors, and post-money valuation
Funding: Raised a total of US$527.5 m
Post-money valuation
Amount raised
$5m
$5m
$22m
$51m
$100m
$350m
$724m
22-Oct-15
25-Oct-16
1-Jun-17
27-Mar-18
22-Aug-18
19-Aug-19
29-Oct-20
$6,746m
Schulte Research
$3,650m
$291m
Series A
Series B
Series B – II
Series C
$1,000m
Series D
Series E
IPO
Sources: CB Insights, Crunchbase Pro
199
116
Paul Schulte
Clover Health
Schulte Research
Case Study
200
Case study 26 – Clover Health
Company overview: regulatory issues and zero
blockchain
Troubled stock plagued by regulatory issues, Reddit squeeze, but expanding distribution channels & strong Medicare TAM
Business model
Go-to-market strategy
Launch in smaller markets, focus on improving quality of customer care &
targeting NPS to keep consumers within system
Medicare Advantage insurer utilizing proprietary predictive analytics
software platform (Clover Health) to create data-driven personalized
insights for patients and physicians
PPO provider networks enable members to see any doctor
participating in Medicare willing to accept them
Clover Assistant: uses machine learning to prioritize care recommendations
and used evidence-based protocols for primary care providers, raising the
level of care and further lowering costs
Continue to leverage data to improve care & lower costs, expand to
additional counties within existing markets (AZ, GA, NJ, PA, SC, TN, TX)
Platform collects, structures, and analyses health / behavioural data to
improve medical outcomes and lower costs for patients
Increases potential consumer base to 5 m Medicare eligible
Success depends on ability to convince PCPs to use Clover Assistant
Goals
Limitations
Streamline process:
reduce overall cost of healthcare
Scandals:
Schulte Research
Personalized offerings:
!
Ongoing SEC investigation regarding failure to disclose DOJ
investigation pre-IPO
!
2015: delayed paying bills for lab tests for senior citizen members as it
tried to get leverage over labs so it could collect data
!
2019: announced that it would
Sources: Clover Health public filings
201
Funding since inception
MCR at 97% ex-Covid, 111% including COVID in Q2 2021: bottom line losses increasing with revenue
Avoid
Amount raised, lead investors, and post-money valuation
Funding: Raised a total of US$2.1 bn, including US$1.2 bn from SPAC transaction
Post-money valuation
Amount raised
$13m
$35m
$160m
$130m
$500m
$1,228m
18-Sep-15
16-Dec-15
20-May-16
10-May-17
30-Jan-19
7-Jun-21
$3,700m
Schulte Research
$2,218m
$1,200m
$820m
$226m
Series A
Series B
Series C
Series D
Series E
SPAC (completed)
Sources: CB Insights, Crunchbase Pro
202
117
M O N E Y M E TAV E R S E
Bright Health
Schulte Research
Case Study
203
Case study 27 – Bright Health
Company overview: rapid scaling but zero blockchain
Fast growing top line with bottom line margins decreasing
Business model
Go-to-market strategy
Began working in tight-partnership with single health systems within a region
(i.e., Centura Health) to give better insights into physician cost and quality
Leverages technology platform and care providers to deliver personalized
virtual & in-person clinical care:
Expanded from initial markets to select locations across South / Midwest
Digital personalized plans for high-risk patients
Continued to grow partnerships to expand consumer base and
overall reach
Offer Individual, Family, & Medicare
Large portion of business stems from Medicare
Have 40 owned & managed clinics
-to-end health
Ultimately create
Goals
Limitations
Streamline process & personalized offerings: create personalized,
affordable and convenient end-to-end healthcare experience
Lack of proprietary technology; no real sustainable tech advantage over
competitors, company focused more on capturing local markets with
Schulte Research
Superapp: integrated tech platform offers variety of healthcare plan
products and everyday clinical care delivery services
Unclear business model
platform to gain traction and consumer retention
-focused
Sources: Bright Health public filings
204
Funding since inception
Down -40.7% since IPO in June stabilizing at US$9.5
Neutral, target at US$12
Amount raised, lead investors, and post-money valuation
Funding: Raised a total of US$2.5 bn, including US$924 m from IPO
Post-money valuation
Amount raised
$80m
$160m
$200m
$635m
$500m
$924m
5-Apr-16
1-Jun-17
29-Nov-18
17-Dec-19
22-Sep-20
24-Jun-21
Schulte Research
$13,416m
$281m
$663m
$950m
$1,000m
Series A
Series B
Series C
Series D
Series E
IPO
Sources: CB Insights, Crunchbase Pro
205
118
Paul Schulte
Apple
Schulte Research
Case Study
206
Case study 28 – Apple
Company overview: awesome technology stack
Apple afraid of regulators?
is
Healthcare focused services that provide an effective tool for insurance firms to implement prevent and postpone measures
Business model
Go-to-market strategy
Significant prevent and postpone functionalities
Healthcare providers:
Centralized and fully integrated platform to serve every day patient
and employee requirements
Create applications that suit your own data and analytics requirements
Key consumer of the Apple Watch to promote fitness and provide a
harmonised health manager service across other Apple devices
Empower individuals to take control of their health and wellbeing
Gather and synthesise client data to create personalised product offerings
through use of products such as the Apple Watch
Retail:
Fully integrated infrastructure to provide a suite of easy-to-use client
products
Goals
Limitations
Schulte Research
Primary care services: Link data from Apple devices to offer ongoing health
monitoring and primary-care as part of a subscription-based program
(Apple ultimately intend to franchise)
Data handling: Apple employees have publicly expressed concerns over
misleading data treatment that skew results in favour of Apple
Early stage technology: tech is still in preliminary testing stages and there is
no certainty such integrated healthcare system will be accepted by wider
population
Digital health: Recent initiative on a digital health app called HealthHabit
that connects people with clinicians via chat and encourages them to set
health challenges
Penetrate healthcare ecosystem: Singapore to become first country to
leverage benefits of Apple Watch by offering incentives for people to use it
to stay healthy and active
Sources: Apple public filings
207
119
M O N E Y M E TAV E R S E
Apple in healthcare
Supports all stages of the healthcare chain from research to implementation
potential to disrupt the insurance ecosystem
Apps on iPhone and iPad allow hospitals to work more efficiently
Apple in Hospitals
Appl
Clinicians can access health records and data rights when they
need them
Ensures better patient safety while administering medication
Patients stay informed about their own care by communicating
with medical teams
Home Patient Care
Visualize, store and record health data collected by institutions
and synthesized devices
Receive health and fitness plans
Schulte Research
Organizations can use off-the-shelf apps or use CareKit to create
apps that empower individuals to manage their health
Medical Research
Create your own apps that suit unique data and analytics
requirements
ResearchKit: Open source framework that streamlines the
process to make it easier to enroll participants, capture informed
consent, and gather medical data more frequently
208
Apple Watch core capabilities
Medical ID
ECG app
Allows first responders and
emergency room clinicians to
access critical medical information
Capture within ECG app and record
symptoms
Provides result of sinus rhythm or
atrial fibrillation, and prompts user to
enter symptoms that can be
exported from the Health app
or Apple Watch without passcode
Fall detection
Heart rate notifications
Allows users to easily call emergency
services when a hard fall is detected
If user unresponsive for 60 seconds,
emergency call will be
automatically placed
Detects abnormally high or low
heart rates which could be a sign of
underlying condition
Notifications can be viewed in the
Health app on iPhone
Health records
Security & privacy
Visualize and securely store health
records from institutions and
generated data from Health app
Creates holistic picture of health
Schulte Research
Health data in Health app is
encrypted on-device
If user chooses to sync health data
with iCloud, data is encrypted while
in transit
Mobility and cardio fitness
Irregular rhythm notifications
Indicates overall physical health and
a predicts long-term well-being
Provides estimates of mobility metrics
Provide tools to monitor mobility and
cardio factors
Checks for signs of irregular rhythms
that could indicate atrial fibrillation
Irregular notification will be recorded
in the Health app
209
120
Paul Schulte
private companies
Schulte Research
US corporate
210
Acko
Schulte Research
Case Study
211
Case study 29 – Acko
Company overview: low-income insurance, zero
blockchain
Offer simple policies to a niche customer base by reducing costs & forming strategic partnerships
Business model
Go-to-market strategy & traction
Online-only digital platform offering micro-policy auto-insurance
Offer bite-sized policies to Indian consumers
Focus on serving low-income, uninsured markets by:
Reducing consumer costs and policy size by focusing on volume
rather than ticket size
Fastest growing insurance company in the country
Team has grown from 6 to 400 people in 5 years
Partnering with various digital firms to grow sales distribution
channels for auth & health policies, reaching more consumers than
a typical insurance firm
Launched health insurance offering in H1 2020
c.60 m customer to date
Issued 650 m micro-policies to date
Goals
Limitations
Reduce costs: traditional insurance too costly to the average Indian makes
c.US$2.1 k per year
Political risk: current regulatory rules require insurance firms to underwrite risk
themselves (unlike several fintech startups in India that work with banking
partners to finance loans)
Bite-sized auto and health insurance through end-to-end digital experience
Schulte Research
No middle-man: enables Acko to offer more personalized policies
Underwriting tech accurately prices risk to create more affordable policies
Entirely digital process improves sign-up and claims speed
Sources: Acko public filings
212
121
M O N E Y M E TAV E R S E
BIMA
Schulte Research
Case Study
213
Case study 30 – BIMA
Company overview: emerging markets insurance, zero
blockchain
Increasing rate of natural/health disasters in developing markets proves a challenge for BIMA
Business model
Go-to-market strategy & traction
: provide memberships
Entered health
and access to tele-doctor services to emerging markets
Provide digital health and Insurtech services in emerging markets
Three fundamentals to microinsurance business model: high volumes, low
cost, and efficient administration
Use data analytics and AI for proprietary tech platform to design
personalized experience for consumers
Combine mobile app development and partnerships with mobile phone
carriers and financial institutions
Has expanded product catalogue and geographic presence
Currently in 3 continents
Agent-driven approach (currently 3,500 sales agents) to educate
underserved markets on benefits of insurance
31 m subscribers to date: c.75% of customers are accessing insurance for
the first time; c.93% of customers survive on less than $10 / day; 3m
customers in Pakistan
Goals
Limitations
Accessibility: Poor access for emerging market consumers to insurance
products and Typical insurance products too large for emerging market
customers
Uncontrollable claims environment: increasing rate of natural/health
disasters for developing markets
Schulte Research
Provide policies, underwriting, and telemedicine via mobile-first platform
Leverage higher mobile penetration rate in emerging market
Proprietary platform, and exclusive partnerships with mobile operators and
international insurers across 13 markets in Asia, Africa and Latin America
Sources: BIMA public filings
214
122
Paul Schulte
NEXT
Schulte Research
Case Study
215
Case study 31 – NEXT
Company overview: SME insurance, zero blockchain
Quick & affordable digital insurance policies tailored to SMEs
Business model
Go-to-market strategy & traction
Sell proprietary commercial insurance policies for smaller businessowners
Started by offering general liability and commercial auto-insurance
Policies focus on general liability, professional liability, and commercial
auto-insurance
Currently operates in 50 states
Offer quick and affordable digital insurance policies tailored to SMEs and
self-employed individuals
2019 GWP grew 3x
Serves 100 k + SMBs, which constitute 1,300 types of businesses
Use AI and machine learning to simplify the purchasing process and drive
down costs by up to 30% compared to traditional policies
Licensed to sell premiums in every US state
US$200 m GWP run rate by 2020 end
Goals
Limitations
Streamline process: SMEs face lengthy, expensive, and vague insurance
options for themselves. Furthermore, a lot of paperwork is required to
purchase insurance plans
Market saturation: heavy competition from larger traditional insurers
Schulte Research
Personalized offerings: Insurance offerings are becoming too expensive and
not tailored to specific business needs
Digital and affordable coverage, tailored to the self-employed and SMEs
Buy policies in <10 mins and access to 24/7 live Certificates of Insurance
Sources: Next public filings
216
123
M O N E Y M E TAV E R S E
Shift
Schulte Research
Case Study
217
Case study 32 – Shift
Company overview: white label insurance, zero
blockchain
Sell proprietary AI solutions to global insurance partners in Health, P&C and Travel
Business model
Go-to-market strategy & traction
Launched in 2014 by utilizing initial SaaS business model, launching
partnerships based on fraud detection for insurers
Sell proprietary AI solutions to large insurance partners globally
Offer products in Health, Property & Casualty, and Travel
Obtained 45 insurance partners by mid-2019 (up 70+ to date)
High barriers to entry with large data-set and improving AI model
Leveraged flywheel aspect of AI algorithm to improve product offering over
time
2 years after launching, Shift processed 50 m claims with an accuracy rate
of 75%
Established global footprint: 70+ insurance companies currently relying on
HyreCar US
Goals
Limitations
Streamline process: insurance companies under pressure to increase
efficiency and improve customer experience as policy lifecycle is proving
difficult to manage for large insurers
Market potential: Traditional insurers show a willingness to keep fraud
detection in-house
Schulte Research
FORCE solution automates and optimizes decision insurance professionals
make on a daily basis to improve efficiency and customer experience
AI-driven decision making for fraud detection and claims automation
Sources: Shift public filings
218
124
Paul Schulte
Hippo
Schulte Research
Case Study
219
Case study 33 – Hippo
Company overview: home insurance, zero blockchain
Utilise smart technology to provide personalized & affordable property insurance
Business model
Go-to-market strategy & traction
Create value by proactively identifying and resolving risks for homeowners
Started with creating new product that differentiated customer experience
Provide accurate and affordable coverage by developing a unique profile
Tested on smaller markets, then expanded offerings to a national scale to
reap flywheel benefits
over time using thermal
and satellite imagery, AI, machine learning and public records
Currently available in 32 states
Aim to reach 95% of US homeowners in 2021
Provide complimentary smart home devices, home care services, and
AI/underwriting to drive pricing efficiency
LTM GWP: US$270 m (140% growth YOY), compared to Lemonade’s $116 m
in 2019 (up 147% from 2018)
Recently switched model: Mitsui now acts as reinsurance & strategic partner
Goals
Limitations
Awareness: over 60% of US homes are uninsured
Political risk:
enacted reforms on outdated laws inhibiting Insurtech
Create fast, easy and, accessible homeowners insurance
Increased focus on potential future regulation of big data, AI, machine
learning, and accelerated underwriting
Schulte Research
Allow homeowners to purchase policies in < 5 minutes
Utilize AI to streamline underwriting, help customers prevent claims, and
facilitate smart home integrations
Provide free smart devices to help detect incidents in advance
Sources: Hippo public filings
220
125
M O N E Y M E TAV E R S E
Schulte Research
Section 3: China corporate
221
Ping An Insurance
Schulte Research
Case Study
222
Case study 34 – Ping An
Company overview: global leader in blockchain
insurance
Complete horizontally integrated O2O offerings providing one-stop-shop
Business model
Go-to-market strategy
First insurance company to create a completely horizontally integrated O2O
offering in growing healthcare and fintech industries
Ping An 3.0:
Open platform & market place that promotes customer migration
Rapidly integrating full hospital/clinic experience to include doctor,
pharmacy, bank and insurance company as one stop shop (e.g. Ping An
Good Doctor)
Shift focus to big financial assets & big health care
Embedding finance in online daily life services
Focusing on offline health data and expanding into healthcare (Good
Doctor) and lending (Puhui)
Customer centric operation model: initiate engagement with one
product -> extend to multiple services -> offer multiple products
Goals
Limitations
Political risk: Chinese crackdown on antitrust with increasing number of fines
US$2.75 bn fine in April 21 2021 after being found guilty of
monopolistic behaviour
Goals originating from Ping An 3.0 business model which looks to create:
One customer
Schulte Research
One account
Legacy: Ping An is hampered by legacy issues in old bank/insurance
models, cost problems, capital guzzling bank and excess labor capacity
Multiple services & products
Sources: Ping An, Schulte Research
223
126
Paul Schulte
Ping An ecosystem at a glance
Single sign on one-stop-shop platform
Financial DNA + Biometrics, Blockchain, Cloud, Big Data, AI
Real estate
P2P/Wealth
3rd party products
3rd party consumers
Core offerings
Core customers
3rd party products
3rd party consumers
Insurance
Asset management
New financial institutions
Schulte Research
Banking
Automotive
Healthcare
Entertainment
Sources: Medium.com
224
How does O2O benefit Ping An?
Improved consumer experience, reduced costs and better operational efficiency
Schulte Research
Health & Life Insurance
P&C Insurance
Fintech
Healthcare
Customer experience
67% increase in repeat
customers
Leader in customer satisfaction
12 hour loan approval
97% satisfaction rate
Efficiency
7.1% increase in sales per
agent
Onsite assessment under 10
minutes for 95% of crashes
30% decrease in interbank trading
times; 20% cost reduction
Imaging analysis time decline by 99%
Cost reduction
99% of claims handled
online
85% reduction in claims leakage
Stopped RMB300 bn in fraud for
partner banks
>8x consultation capacity
Accuracy
70% of claims paid in under
60% reduction in fraud
30 minutes
Credit loss ratios decreased by 60%
90% accuracy forecasting flu patterns
Sources: Ping An, Schulte Research
225
Fully autonomous financial ecosystem
Schulte Research
Ping An has made greater strides into becoming an autonomous financial ecosystem than any other company
Sources: Ping An, Schulte Research
226
127
M O N E Y M E TAV E R S E
First to integrate offline data
Schulte Research
Unparalleled offline data access and is among the first to actively integrate it & see it as one pool
Sources: Ping An, Schulte Research
227
O2O data strategy
Unparalleled offline data access and is among the first to actively integrate it & see it as one pool
Online Data
Social Media
Offline Data
Fintech
Medical Appointments &
Prescriptions
Health & Biometrics
Cloud Data Universe
44% (OneConnect)
Schulte Research
AI Analysis
Diagnosis, appointments,
treatment & health news
39% (Good Doctor)
1833.3 HK
Health, Life, P&C
100%
Asset Management
44% (Lufax)
CityConnect
(Healthcare Technology)
Zhong An
12%
Sources: Ping An, Schulte Research
228
Healthcare ecosystem
O2O strategy in action
Healthcare management
H
authorities
Health commissions
Medical Products
Administration
Healthcare Security
Administration
Implemented in 158 cities
across 30 provinces
Administrating local government finance,
supervising doctors, and institutions
Patients
Service providers
Retail
903k daily consultations
373m registered users
Institutions
Guiding
medical
healthcare
behaviors
Doctors
Payers
Pharmacies
Managing
medical
institutions
and
affecting
users
Online
Corporate
Ranked 1st by number of SHI
service subsystem bids won
Commercial Insurance
Offline
1,100+ enterprises
Schulte Research
Social Health Insurance
21k institutions
covered
1,000+ partner
hospitals across the
world
About 650k doctors
served
In-house medical
teams of 2,200+
members
21k+ external
contracted doctors
150k+ partner
pharmacies
No.1 health insurer in China
65m+ life insurance customers
RMB140 bn+ written premiums of
health insurance
L
Leveraging
i
ttechnologies
hn l i tto empower k
key
businesses
Technologies
Research
IInstitutions
Ranked 1st globally by digital healthcare applications
Investment
Institutions
Invested in nearly 100 companies in the healthcare industry
229
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Paul Schulte
Schulte Research
Section 4: Ultimate weapon for super app
230
Omnichannel digital insurance ecosystem
End-to-end customer platform
Data, AI, Scalability
H lth Wellness,
Health,
Health
Wellness and
Well
nd Lif
Lifestyle
t le
features
Diagnosis health and symptoms
Telemedicine
Sell insurance products seamlessly in
a one-app platform
Streamline connection with agents
Value-added services
P mote
Promote
t tailored
t il
d bite-sized
bit sized or
bundled insurance products
Auto-underwriting capabilities
based on customer risk assessment
Reduce need for manual processing
on time-consuming data collection
Promote connectivity with smart
wearables to fuel consumer data
Attract and retain customers
Data-fueled insights
Schulte Research
I
Improve
customer
t
experience,
experience
erie
establish greater trust, and foster
credibility
Encourages healthy behavior and
lifestyle decisions
Attract younger customer base
Engaged & easy-to-use experience
Offer incentives upon achieving
certain milestones
and ultimately profitability
Better policy cover and risk
identification
Create leads for agents to sell
regular-sized insurance products
One-app
platform
Just-in-time tailored policies
Dynamic pricing & risk mgmt.
A t
Auto-underwriting
Auto-underw
nderw
er riti
riting bit
bite-sized
sized and
nd
bundled insurance policies
Manage current policies held and
access large offerings at lower price
thresholds
Bett policy
Better
li cover and
nd risk
identification in less time
Administrative efficiency
Improve / reduce premiums
dynamically to reduce claims risk
231
Combining Healthtech and Insurtech
Data-driven insurance coverage, expanding from insurance protection to prevention and delay onset of disease
Consumer
Pricing and
underwriting
e.g., form submissions
Behavioral
e.g., interaction with platform
Personal &
demographic
e.g., KYC
Data Integration
e.g., physical activity
Engagement
Settling claims
Insights on customers
healthcare
Identity
Unification
Shape policyholder
behavior
Schulte Research
Data
Enrichment
Improve customer
experience
Preferences
e.g., interaction content
Data integration
Reduce need to seek medical care
Faster and partially-automated claims settlement
Fraud and abuse prevention
Data
Cleaning
Insurance coverage
e.g., current policies
Automated underwriting for bite-sized products
Dynamic risk management and pricing
Better policy cover and risk identification
Data
Transformation
Identify, unify, segment
Family history, health checks, symptoms checks
Data-fueled insights through smart wearables
Translate data into customer products
Free tailored insurance products as incentives
Predictive algorithms to provide relevant content
Incentives as requirements for lower price thresholds
Predictive algorithms to provide relevant content
Reduce need for medical care and early interventions
Encourages healthy behavior and lifestyle decisions
Data-driven opportunities
232
129
M O N E Y M E TAV E R S E
One-app creation
Schulte Research
A focused prevent and postpone
framework
Leverage Vitality and other white labels, enhancing efficiencies around the group starting with Prevent and Postpone
Enable effective actuarial dynamics and risk assessment capabilities
for more personalized protection
Clear integration into the Shared-Value insurance model
Customers can optimize health and wellness investments
Integration with doctors and nurses
Unlock greater value for both policy holders and insurers
Well-established and diversified partnership base
Scalable platform with concrete evidence that it can be used
across multiple geographies and insurance companies
Health record accessibility
Clear customer engagement
No direct policy offerings
Vitality One at the foundation:
Fully integrated, cloud-based framework offering a single point of entry for Vitality Group partners
233
One-app creation
Enhance efficiencies around the group with Protect
regular and bite-sized insurance policies
Cross-selling / up-selling insurance products
Integrate current policyholders
Direct to customer offering of bite-sized cover
Digital access of current policies underwritten in a transparent way
Customized packages, products, and 3rd party service offerings
Easy-to-use experience underlies repeated purchases
Schulte Research
Modular products with subscriptions and fee for service
Lead generation for agents with virtual face-to-face fulfilment
Manage current policies seamlessly
Drive revenue streams and operating leverage through scalability
of the platform
Avoid manual processing and agents contact, leading to more
time dedicated to selling regular-sized products
Engages directly with customers rather than push product
Higher sales generation via cross-selling / up-selling Health &
Wellness products and services and tailored insurance products
234
Dynamic risk management and pricing
Significant investments, M&A, and Partnerships required for upside potential across the insurance business
Dynamic pricing, risk management, and underwriting
Investments, M&A, Partnerships
Leverage Data Analytics and AI capabilities to maximize automation of
insurance product offerings via auto-underwriting for customers e.g.:
Requires modular platform that digitises core insurance processes while at
the same time allowing dynamic access to the services and products within
the ecosystem
free insurance coverage via milestones achieved through Health &
Wellness platform;
Need to update current infrastructure to participate in the digital health
ecosystem
bite-sized and bundled policies for underserved segments of
society; and
Leverage available data requires investment in data management and
analytics capabilities
Regular-size premiums by creating leads for agents
Develop a compelling digital insurance ecosystem involves structuring
meaningful partnerships with industry leaders, including technology
providers who enable customer access and utilisation
Just-in-time policies and products that offer value to the end customer
Data-fueled insights to better policy cover and risk identification for
customers in less time
Integrate and reassess risk management models for auto-underwriting
insurance policies and virtual face-to-face fulfilment with agents for regularsized products
Seamless data sharing among all parties, strong foundation to reduce the
need for manual processing or time-consuming data collection
Schulte Research
Realaccount specific risk models while offering a more personalised, predictive,
and preventive health service
Inform day-to-day insurance premiums and policies
235
130
Chapter 4:
Proptech and Blockchain
Section 1: With the rapid and sudden digitization of finance through BSN/PBOC
DCEP and many central bank coins, the proptech revolution will happen much faster
than fintech or insurtech. Figure 95 to Figure 99 show our summary of each company.
Chinese company sectors
Powered by superapps, 5G, edge computing and smart cities
My Dream+
ZiFiSense
9am
IoT
YITU
Dahua
JD.com 51VR
Energy
Retail
AI
GI
GISUNI
WIFIPIX
GeoHey
Real Estate
Xkool
Sources: Schulte Research
Figure 95
Chinese company sectors
Powered by superapps, 5G, edge computing and smart cities
WIFIPIX
Big Data
GISUNI
GeoHey
JD.com
Listings
YITU
Smart
cities
Data
ZiFiSense
Dahua
Xkool
My Dreams+
51 VR
9am
Property
Management
Sources: Schulte Research
Figure 96
131
M O N E Y M E TAV E R S E
Western company sectors
Powered by banks , SWIFT, credit cards
Neul
IoT
Aurora Solar
Urbint
EVERYTHNG
JD.com
Energy
Aquicore
AI SmartRent
Retail
Blueprint PowerAppear Here
Enertiv
Convene
VTS
Loft
Real Estate
Reonomy
GeoPhy
Sources: Schulte Research
Figure 97
Western company sectors
Powered by banks , SWIFT, credit cards
Pavegen
Big Data
Reonomy
GeoPhy
EVRYTHNG
JD.com Neul
Listings
Urbint
Aurora Solar
Blueprint Power
Smart
cities
Data
Appear Here
SmartRent
Aquicore
Enertiv
Property
Management
Convene
Sources: Schulte Research
Figure 98
The center of it is the necessity of artificial intelligence to manage an explosion of
data that is incomprehensible to any human mind or any group of humans. We think
it is separated into four areas. Firstly, the absorption of the digitized physical world
into software and hardware companies that can manage massive data sets. These are
Pavegen, Neul, and EVRYTHNG — primarily located in the Golden Triangle of
Oxbridge and GCHQ. Pavegen is best in show here – although we make it clear that
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Paul Schulte
Greater China is at least one generation ahead of the West in proptech. Huawei has
swallowed up Neul, so we may never have a chance to see its technology.
Secondly, Energy is the other sector which plays a vital role in proptech. Whether
the ESG phenomenon is virtue signaling or genuinely effective, it is here to stay. Proptech for power can drastically reduce carbon emissions by more efficient energy use in
buildings and homes — full stop. Blueprint Power is best in show here.
Company Overview
Primarily hardware provider (c.80% of revenue) with recurring revenue from Hub and SaaS (c.20%)
Business model
Go-to-market strategy
Leading solution provider for owners / operators & residents, providing endto-end solutions for smart-home technology
Highly visible pipeline of demand with c.US$710 m revenue from committed
units
Key verticals in Home IoT, Building IoT, and Resident experience
Deploy new products and services including Smart Intercom, Alloy Access
Solo, and new Student housing division in Q2 2021
Revenue of c.US$21.68 m in Q2 2021, +274% YoY
Key customer channel in multifamily owners in the US: 13 out of 20 are
investors in SmartRent, 15 are clients
Distributes products and services directly to property owners (i.e., large
purchase orders and long-term technology commitment)
Sales channel: Channel partners, Single family rentals, Homebuilders,
Student housing, and Multifamily communities
Estimate EBITDA positive by the end of FY22
Goals
Limitations
Revenue opportunity from existing customer estimated at c.US$1.8 bn in
annual revenue
Supply chain issues during the pandemic, shortages of hardware in Q2 and
still ongoing
606 k committed units
Lack in-house hardware manufacturing, relying on third-party products
Schulte Research
c.US$710 m revenue from committed units
Integrate with AppFolio Property Manager Plus for larger businesses to
automatically synchronize units, leases, residents, and service orders with
IoT
Expansion in Canada underway, pilot program in the UK
Pilot program for student housing in the US
Sources: SmartRent public filings, Pymnts, Deutsche Bank Technology Conference,
270
Figure 99
Funding since inception
Content/Section Title
Amount raised, lead investors, and post-money valuation
SPAC structured to align with long-term investors: (i) no warrants; and (ii) FWAA subject to lock-up agreements of up to 3 years
Existing shareholders subject to 6-month lockup period
Post-money valuation
Amount raised
$2m
$5m
$32m
$60m
$31m
$500m
20-Mar-18
5-Oct-18
7-Jun-19
27-May-20
4-Mar-21
22-Apr-21
Schulte Research
$2,200m
$8m
$13m
$209m
Seed VC
Series A
Series B
Series C
Series D
SPAC (pending)
Sources: CB Insights, Crunchbase Pro
271
Figure 100
133
M O N E Y M E TAV E R S E
Fifth Wall sponsor & Strategic partners
Access to distribution lanes through c.70 strategic Real Estate LPs from 15 countries
Fifth Wall
Sponsor
NA: strategic LPs network
EU: strategic LPs network
Strong record of investing in Proptech companies, but has yet to
successfully take any businesses public through SPAC
c.US$2.5 bn of AUM, 5x closest competitor
c.70 strategic real estate LPs across 15 countries
Synergies potential with LP network
three years
Fifth Wall Investment Activity1
Asia: strategic LPs network
Data in US$ m
Number of deals
$1,480.9 m
$ 6
,1 0 m
20
$ 4
,1 0 m
$1,133.0 m
Schulte Research
$ 2
,1 0 m
$884.1 m
$ 0
,1 0 m
$693.8 m
$ 0
8 m
0
15
$614.0 m
10
$ 0
6 m
0
$ 0
4 m
0
$282.2 m
$ 0
2 m
0
5
$111.9 m
$ m
0
2016
2017
2018
2019
2020
Q1 2021
Q2 2021
Number of deals
Funding
0
Sources: Fifth Wall, SmartRent public filings
(1) CB Insights
272
Figure 101
The last two areas of the sectoral approach to proptech are platforms and retail.
SmartRent is interesting here. We did a profile on its business, shareholders, and fundraising history – Figure 99, Figure 100, and Figure 101. It is a mix of AI, retail smart
homes, and smart cities, digitizing homes, reducing insurance, implementing admin
software, fully automating management services, and rolling out third-party software.
It is approaching one million committed units.
Section 2: In Figure 98, we look at companies from the business niche point of view.
These include Big Data, Listings, Smart Cities, and Property Management. In the
center of the action is the management and use of data.
Appear Here is another company that deserves closer attention. It lies in the intersection of data, smart cities, and property management. Appear Here is dubbed the
Airbnb of retail and uses technology to create flexible leases for thousands of brands.
It is essentially an online marketplace to lease short-term space in the UK and US.
Loft is another company which comes up here. It is a solid company, but we are
concerned about startups that parade themselves as platforms. Loft is in Brazil – a
disorganized fractured market. It is the best “go-to” asset as an inflation hedge, and
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Paul Schulte
Brazil is heading into another serious inflationary mess. So, this is a play on Brazilian
inflation as much as anything else.
Enertiv is a CRE company getting much attention in New York. It is an all-in-one
platform for CRE.
Section 3: Highlighting companies with public equity.
We reiterate SmartRent above. The very disappointing performance of SPACs has
caused a recent and dramatic reform in the way they are being rolled out. SmartRent
is on the road now and completed the SPAC process recently. This is definitely worth
paying attention to as it is a first mover in an important space.
The second company we highlight is KE Holdings. This is a recent China listing
on the NYSE as BEKE. It is another example of what can happen in digitizing assets when the proper infrastructure is laid – 5G, super apps, smart cities, cloud, and
blockchain infrastructure. Its partner is Tencent and does real estate transactions for
sales and rentals. It also engages in finance and renovation. It has a 15% market share
in second homes and a 5% share in new homes. It holds a number one share by far.
Coverage has been picked up by GS, Jefferies, and several Chinese brokers. It has no
leverage.
Section 4: A vitally important case study in this chapter is Linklogis. Excellent company with world-class technology but poor returns.
Section 4.1: Strong management, proven track record, high barriers to entry, number
one position.
Linklogis is the ultimate digitized supply chain finance ecosystem. It is the leader in a top priority of China: SME funding for working capital on blockchain and
connected to BSN. It is another company which is right time, right place, right
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M O N E Y M E TAV E R S E
t echnology, right people. And we emphasize the importance of this company being in
the middle of two top priorities of China: BSN and SME funding. It is at the nexus
of the policy machine.
Linklogis’ mission is to redefine and transform supply chain finance through technology and innovation. Supply chain finance based on blockchain helps businesses along
the supply chain improve working capital and financing efficiency cost-effectively by:
(i) effectively authenticate supply chain transactions;
(ii) cooperating with other participants in the supply chain finance ecosystem;
(iii) managing operational risks; and
(iv) achieving integrated supply chain management.
Revenues are primarily generated from technology solution service fees based on
transaction volume. Fees typically range from 10 bps to 80 bps. Their SaaS model
offers a low cost of ownership for customers. It saves customers high upfront costs
and considerable investment in building their infrastructures and technology stacks
from scratch (i.e., ~¥30 – 40m upfront costs, and ~¥5 – 15m maintenance fees every
year). This efficient customer acquisition strategy benefits from an extensive network
of partners in the supply chain finance ecosystem.
Section 4.2: Technology – AI, OCR, blockchain, cloud, and eventual international
connectivity through BSN
First, AI-powered Optical Character Recognition (OCR) and Natural Language
Processing (NLP) technologies and data analytics automate workflows. AI accuracy
rates are ~99% for general documents and more than 90% for complex legal documents. Second, blockchain addresses information transparency and security issues.
With transaction data recorded on immutable ledgers, different parties can accurately
trace and validate transactions, building trust and managing risks more effectively.
Third, Cloud-based solutions can be accessed anywhere and anytime through mobile
devices or online portals.
Their SaaS model helps reduce the burden associated with system implementation, upgrading, and hosting. They have 400 technology professionals, 63% of total
staff, 233 patents, and 114 copyrights.
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Paul Schulte
The primary offering is:
(i)
fully digitalized technology solution designed for securitization of supply
chain assets;
(ii) enhanced traceability and authenticity of supply chain finance and payment;
(iii) blockchain-powered cross-border supply chain finance technology solutions.
The practical workings are: public and indelible ledger include creditor and debtor
information, creditor’s rights amount, anchor enterprise confirmation date, asset maturity redemption date, and other information simultaneously recorded on the blockchain to form an immutable and traceable record. After the anchor enterprise cashes the
digital payment obligation, the platform will automatically allocate funds to all supply
chain companies that hold the debt. The result is lower financing costs, transparency,
and security. And any company entering into the system has virtually zero upfront costs.
The result is shorter payment cycles and cash flows improvement; improved access
to financing; digitalized, efficient, and convenient financing processes; and lower-cost
financing by leveraging anchor enterprises’ prime credit profile, with SMEs’ financing
cost-effectively lowered from a typical range of 10 – 20% to 5 – 6%.
Established partnerships mainly in China
Tencent-backed Standard Chartered support to access cross-border SCF market
Schulte Research
Receivables packaged for
Receivables funded by
Sources: Linklogis public filings
257
Figure 102
Figure 102: The company has a who’s who of financial institutions backing it.
These include (on the right) the Big Four banks, many regional and city banks, DBS,
137
M O N E Y M E TAV E R S E
OCBC, and Stan Chart. The customer base (on the left) is the entire Chinese economy, including the most significant cash cow in the universe (The Grid) as well as
problematic real estate firms – and everything in between. We suspect Linklogis will
become a key cog for BSN. Watch this space.
Section 4.3: Funding and risk: an awesome coterie of clients and funders.
The chart above shows the funders and the customers of Linklogis. It is essentially
a who’s who of China, including all the top Tier 1 banks and top regional city banks.
The top tier banks which fund it include ABS, CCB, BOC, and ABC. Of course, Tencent is a major founder since it is a controlling shareholder. Several large city banks
are also funders.
On the flip side, the customers whose receivables Linklogis packages represent the
Chinese economy: utilities, telecoms, industry, property, services, and exporters.
This company is very operationally geared to the Chinese economy, so it is a perfect proxy for growth expectations. Although it is well-funded, it does have exposure
to large property companies like Evergrande, which is known to have excessive leverage issues. As a factoring company, it has wild swings in working capital to the tune of
billions each quarter, producing high volatility in the stock price if there is a liquidity
squeeze when the balance sheet is leveraged.
Section 5: Additional research in PowerPoint format.
The PowerPoint deck in this chapter goes throughout the integration of smart
buildings with smart cities. It looks in detail at two other important companies. One
is in the US and is Compass. The other is Bukalapak and is in Indonesia. They are
both doing fascinating things in their way. Proptech now feels similar to fintech 5-6
years ago. A small group of entrepreneurs is taking it seriously. However, too many
giant monoliths are sitting and watching, slow to act, confused by the speed of things.
They remain paralyzed at their own risk.
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Paul Schulte
Schulte Research
Chapter IV: Proptech and Blockchain
236
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players
NFT
Intellectual property
Crypto
Fintech
Property
Money
Insurance
Art/Wine/Sports
NFTs
Gaming
Rewards and incentives
China key players
Insurtech
Proptech
Risks
Schulte Research
Monopoly behavior
Antitrust hindering
development
Railroads Required
Blockchain (e.g., BSN)
Central Bank Digital Currency
Incentives to develop
proprietary technology
Fragmented data
Public trust
Sources: Schulte Research
237
139
M O N E Y M E TAV E R S E
Schulte Research
Section 1: Proptech landscape
238
Categorizing Proptech business models
Fintech and Proptech at crossroads: spin off from fintech in a move to better address the real estate industry
Schulte Research
By Market
By Technology
Indoor Mapping
Sharing Economy
Agent Tools
IoT
Real Estate Search
AR/VR
Property Management
RPA
Facility Management
Blockchain
Construction Management
Cloud
Home Services & IoT Home
ML & AI
Sources: Schulte Research
239
Smart city fundamental layers
Urban layer
Scenarios
Platform service
layer
Storage &
computing
Smart transportation
Smart security
Smart
environmental
Smart government
Smart education
Smart energy
Operation & mgt.
platform
Big data platform
Schulte Research
City service
Platform
m service
ce layer
ay platform
St
torSmart city
ting
g
Storage
& computing
operation
Smart healthcare
Command center
center
Communication
Sensor terminal
layer
Data collection
Platform
m service
ce layer
ayprotection
Storage
St
e & computing
mputing
ti
Platform
a Mobile
service
aye
networklayer
4G/5G
Storage
& computing
or
ng
Broadband
Smart camera
Smart sensor
Platform
a
service layer
aye
Smart phone
Storage
or
& computing
ng
IoT
Wearable device
Smart infrastructure
Sources: Schulte Research
240
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Paul Schulte
Application: 5G slicing network
Slicing network empowers secure and integrated wireless police system
Converged
command center
Application
Public security intranet & video cloud network
Core network / network slicing
Network
5G base station
Schulte Research
5G CPE
Patrol car /
motorcycle
Terminal
Mobile surveillance
Patrol robot
AR goggle
Sources: Schulte Research
241
Application: 5G slicing network
Technical Framework of 5G Smart Healthcare
Application
Remote diagnosis &
treatment
Smart ward
Platform
Health
management
Internal medical application platform in hospital
Core network
Application
Hospital intranet
Schulte Research
5G base station
Internal mobile
medical device
Terminal
Remote diagnosis &
treatment device
Ambulance
Sources: Schulte Research
242
Application: 5G slicing network
Securitize smart cities using blockchain
Interface Layer
Smart Energy
Smart Parking
Smart Home
Smart Health
Smart Traffic
Smart Cleaning
Applications
Permissionless
(Public)
Database Layer
Permissioned
(Private)
Distributed Ledger
Communication Layer
PAN
Bluetooth
6LoWPAN
LAN
Wifi
Ethernet
Light
Humidity
Pressure
Stepper
WAN
3G
4G
Ethereum
NXT
Telehash
Schulte Research
Networks and Protocols
Physical Layer
Motion
Temperature
Soleniods
Motors
Sensors and Actuators
Sources: Schulte Res
Research
arch
243
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M O N E Y M E TAV E R S E
Proptech use cases
Proptech covering a wide range of pain points for real estate start ups
58%
54%
48%
44%
46%
44%
42%
40%
Schulte Research
32%
Planning permission
proces s
Source: KPMG
Building management
Transactions
Customer experie nce
Data management,
security & privacy
Marketing & insights
Performanc e
measurement &
tracking
List management &
compliance
Lease renewals
An Annual Review of The Real Estate Industry
244
Key drivers of growth
Proptech trends disrupting the property & real estate sectors
Transforming the way customers are being served:
Assess profitability of
apartment purchase
Locate buildings
Real-time data on housing
In-depth market analysis
Big Data in Real
Estate
Rapid deal closing
AI saves c.US$1.2 m to a single business in 6 months
Automated workflows
Process & analyze data
IIoT
Ensures efficient natural resource consumption
Drones providing a 360 degree view display
Leads to an improved supply chain
Provides protection for on-site workers
inspect
Schulte Research
Nature-oriented solutions
they no longer have to manually
Drones pre-empt any maintenance requirements and planning
Minimize emission and pollution levels
Sources: byteant
245
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Paul Schulte
Key drivers of growth
Proptech trends disrupting the property & real estate sectors
Automate first point of contact: customer representative no longer needed
reducing business costs, and enhances likelihood of lead conservation
Smart retail can drive:
Reliability and security
Personalized experience: Chatbots becoming increasingly clever to create
a tailored experience through analyzing individual preferences
Easy deployment
Sales
Customer experience
Better decision making
Property walkthroughs accelerate sales process
Variety of benefits to real estate:
Geographically distant site tours
Transaction management: allow agents and brokers automate transaction
process
Schulte Research
Project management assistance from offsite experts
Avoid unexpected expenses through information modelling
3rd party integration: integrate into other systems such as payment
gateways, CRMs, etc.
Increase decision making activity from leasing customers by providing
efficient viewing
CRM: build and manage relationships
Marketing automation: create targeted campaigns
Property management: manage leases, properties and maintenance
Sources: byteant
246
Market map
Reshaping how properties are bought, sold & managed
List & Search Services
Investment/Crowdfunding
Schulte Research
Brokerage
Property Management
Sources: CB Insights
247
143
M O N E Y M E TAV E R S E
Schulte Research
Section 2: Company profiles
248
Linklogis
Schulte Research
Case Study
249
Case study 35 – Linklogis
Company Overview
Capital light business model with strong leverage, self-reinforcing supply chain finance ecosytem
Business model
Go-to-market strategy
Established and value-oriented partnerships with major anchor enterprises
and financial institutions both in China and globally
Leading technology solution provider for supply chain finance in China
Digitalized and specialized solutions to optimize mission-critical workflows
for SCF and payment, enabling financial institutions and anchor enterprises:
High technological barriers to entry, need to continuously enhance its
current position
To effectively authenticate supply chain transactions;
Transaction-based revenue model, generated from volume of transactions
on the platform
Cooperate with other participants in the SCF ecosystem;
Manage operational risks; and
Established customers (i.e., Anchor enterprises and Financial institutions)
refer Linklogis solutions, propelling flywheel effect on customer acquisition
Achieve integrated supply chain management
Goals
Limitations
Competes with large well-funded competitors backed by large
conglomerates with fire power
Re-define and transform supply chain finance
Expand overseas footprint and replicate business model in the international
market
Attractive financial profile combining growth and high operating leverage.
However, face significant liquidity and credit risks
Schulte Research
Shorten critical liquidity needs and cash collection cycle for SMEs
Unclear exposure to Real Estate market (e.g., Evergrande)
Strengthen existing industry verticals coverage and expand into different
verticals and geographies
ABS market demand and short-term borrowing loans availability
Continuously invest in technology and infrastructure to solidify current
leadership in an increasingly competitive SCF landscape
Customer concentration risk, macroeconomic, and regulatory risks
Launch Bill Cloud and Olea platform in H1 2021
Sources: Linklogis public filings
250
144
Paul Schulte
Funding since inception
c.US$365 m worth of cornerstone investment lock-up due to expire 9-Oct-21
Amount raised, lead investors, and post-money valuation
9-Oct-21: expiration lock-
FIL, SNP China Enterprises)
09-Apr-22: expiration lock-up period for other stakeholders (e.g., CITIC, Tencent, Trident, GIC)
Post-money valuation
Amount raised
$14m
$29m
$220m
$55m
$1,000m
1-Aug-16
10-Aug-17
15-Oct-18
9-Jan-20
9-Apr-21
Schulte Research
$5,800m
$1,525m
$1,050m
$26m
$101m
Series A
Series B
Series C
Series C – II
IPO Closing
Sources: CB Insights, Crunchbase Pro, Bloomberg
251
Blockchain, AI, Cloud, and Big Data
Blockchain-powered supply chain finance technology
Blockchain
AI and Cloud Computing
Blockchain technologies address information transparency and security
AI-powered Optical Character Recognition (OCR) and Natural Language
Processing (NLP)
Transaction data recorded on immutable ledgers
OCR, NLP, and data analytics capabilities to automate workflows, leading
the industry with AI accuracy rates of c.99% for general documents and
c.90% for complicated legal documents and contracts
Different parties can accurately trace and validate transactions
Solid trust foundation and risk management effectively
Cloud-based solutions accessed anywhere and anytime through mobile
devices or online portals
Joint venture with Standard Chartered to offer blockchain-based trade
finance platform Olea
SaaS model reduce burden associated with system implementation,
upgrading, and hosting
Cloud computing
Remarks
Linklogis first:
Team of 400 technology professionals (c.63% of total staff)
Launched second R&D centre in Wuhan, home to 30 R&D specialists
Schulte Research
To offer fully digitalized technology solutions designed for
securitization of supply chain assets;
233 patents, 150 trademarks, 114 copyright registrations
To apply blockchain technology to enhance traceability and
authenticity of SCF and payment; and
To launch blockchain-powered cross-border SCF technology
solutions
Sources: Linklogis public filings
252
AMS Cloud Solution
Schulte Research
Streamline supply chain financing
!”#
145
253
M O N E Y M E TAV E R S E
Multi-tier AR Transfer Cloud
Schulte Research
Blockchain permits transparency, scalability, efficiency, and security
!”#
254
ABS Cloud
Schulte Research
Securitization of accounts receivables in Asset-Backed Securities
!””
146
255
Paul Schulte
Cross-border Cloud
Schulte Research
Access to overseas market for cross-border supply chain financing
!”#
256
Established partnerships mainly in China
Tencent-backed Standard Chartered support to access cross-border SCF market
Schulte Research
Receivables packaged for
Receivables funded by
Sources: Linklogis public filings
257
147
M O N E Y M E TAV E R S E
Compass
Schulte Research
Case Study
258
Case study 36 – Compass
Company Overview
Traditional real estate agent selling tech valuation and trying to buy market share with investment money
Business model
Go-to-market strategy
Agent-centric business model, providing online platform for buying, renting,
and selling real estate assets
Aggressively expand using capital to hunt high-quality agents, acquire
brokerages and ancillary services such as title and escrow companies
c.2.5 3.0% taker fee on sale price of a home, with commissions paid to real
estate agents at
Improve efficiency of agents through technology stack including CRM
platform
Impressive QoQ (+72.3%) and YoY (+201.5%) growth in gross profit, reaching
c.US$372.7 m in Q2 2021
We believe hefty commissions and equity underpin growth agent network
instead of attractiveness to value-added technology Compass provides
Adjusted EBITDA profitability reached in Q2 2021 of c.US$74.3 m
IPO proceeds to fuel market expansion including internationally, focus on
ancillary services for higher margins
Goals
Limitations
Compass spending fortune buying smaller companies and paying out
higher-than standard commissions and incentives
Replace complex paper-driven antiquated workflow with seamless all
digital end-to-end platform for real estate agents
Increase agents count organically or through acquisitions
Technology centred around the agent seems overshadowed with Compass
buying market share with investment money
Schulte Research
Improve both business and agent efficiency through R&D investments
Accelerate adjacent services offering, including Title and Escrow services,
Real Estate Marketing
Disruptor by capital not innovation: aggressive expansion at the detriment
of their original business model by strengthening Compass as a luxury brand
hunting high-quality agents
Address international markets notably in Canada, Australia, and Western
Europe
Highly competitive market with little room to differentiate and increase gross
profit margins due to agents requiring high commissions to stay at Compass
Sources: Compass public filings, Protocol, The Real Deal, Mike DelPrete, Inman,
259
148
Paul Schulte
Products offering
Agent-centric business model, providing online platform for buying, renting, and selling real estate assets
Advising sellers
AI-driven renovation
visualization
Attracting and retaining clients
Home-improvement
Ticketing
Advising buyers
Title & Escrow
Listing search
AI-driven client prospecting
recommendations
Agent-client collaborative
home search
Open house management
Home valuation analysis
Listing tour scheduling &
coordination
Virtual tours & open houses
Marketing content creation & management, digital ad campaigns, email
and social Marketing
Market insights and reports
Listing analytics
Transaction closing management
Schulte Research
One-click listing video
creation
Mobile, Cloud native AI, and Data foundation
260
Funding since inception
Content/Section Title
Amount raised, lead investors, and post-money valuation
29-Sep-21: expiration lock-up period following IPO
Post-money valuation
Amount raised
$8m
$20m
$40m
$50m
$75m
$100m
$450m
$400m
$370m
$463m
17-Dec-12
25-Sep-13
21-Jul-14
15-Sep-15
31-Aug-16
11-Aug-17
7-Dec-17
27-Sep-18
30-Jul-19
1-Apr-21
$6,965m
$6,400m
Schulte Research
$4,400m
$1,800m
$150m
Seed VC
Series A
$360m
Series B
$800m
Series C
$2,200m
$1,000m
Series D
Series E
Series E – II
Series F
Series G
IPO
Sources: CB Insights, Crunchbase Pro
261
149
M O N E Y M E TAV E R S E
Bukalapak
Schulte Research
Case Study
262
Case study 37 – Bukalapak
Company overview
Transitioning from eCommerce to super app via partnerships instead of developing in-house
Business model
Go-to-market strategy
Core focus on eCommerce & inventory/supply chain for MSMEs, expanding
into other services (e.g., financial services)
Primarily eCommerce platform (c.76% of revenue in 2020)
c.70% of transaction volume in 2020 came from non-Tier 1 areas
Products and services through partnerships instead of proprietary
development (e.g., eWallet, mutual fund investment)
eCommerce platform to cross-sell/up-sell ancillary products and services
Broadened into financial services, such as loans and investment in mutual
funds (Reksa)
Goal to increase scalability to establish barriers to entry and anchor
network effect of family-businesses
BukaPengadaan: create own goods (e.g., office supplies)
MSMEs
of national GDP
Access to internet and eCommerce through local Warung (O2O)
Schulte Research
Goals
Limitations
Make Indonesia (particularly non-Tier 1) more financially inclusive and
establish itself as the go-to-lender and services provider
Lack of proprietary technology, white label partners to fuel growth instead
of developing in-house
Focus on Fintech space and digitising fragmented supply chain
Currently most of profit for non-Tier 1 commerce is captured by
manufacturers at the top of the supply chain
Continue to grow and leverage partnerships to establish barriers to entry
through number of users instead of proprietary technology
Focuses on niche non-Tier 1 cities, facing increasingly competitive
landscape from well-funded competitors (e.g., GoTo, Grab, Sea)
Supported by a network of Mitra, small/micro retailers with limited internet
access
Operating solely in Indonesia, limiting economics of scale
Sources: Bukalapak public filings, The new normal: digitalization of MSMEs in Indonesia
263
Funding since inception
Chinese Tech Giants are Investing in Bukalapak or Competitors
Ownership
Traditional banks investors (e.g., Standard Chartered, Madiri, Shinhan, BRI) help implement financial services
not the way forward for digitalisation of MSMEs
Alibaba with c.17.4% tied-in via Ant Group (investor in Lazada, eCommerce in SEA and Tokopedia now GoTo)
Microsoft holds c.1.21% stake pre-IPO
No intention to issue new shares in first 12 months of public trading
Post-money valuation
16-Nov-17
Major investors
Amount raised
$50 m
$100 m
$234 m
$400 m
$1,500 m
4-Oct-19
11-Mar-20
14-Apr-21
8-May-21
8-Jun-21
$6,000 m
$5,200 m
Ownership
31.90%
17.40%
12.60%
CEO
Schulte Research
Co-Founder
$2,500 m
3.53%
3.30%
$2,800 m
Co-Founder
2.78%
2.48%
$1,000 m
Series C
5.76%
4.22%
c.$4,400 m
Series D
Series F
Series F-II
Series F-III
IPO
2.40%
Sources: CB Insights, Crunchbase Pro, Momentum Works
264
150
Paul Schulte
Future Products/Services
Platform is proprietary; assisted/ran by outsourcing
Collaboration government, partners, and financial institutions
Technology
Focus on proprietary products and services recently through acquisition Five
Jack in 2021 (i.e., company behind largest marketplace for entertainment
and gaming goods)
Teaming with Bank Mandiri to turn Warungs into banking agents
Outsources most of the IT infrastructure
Indonesian Central Bank froze issuing of new eMoney licenses in 2019:
Selected by the government to disburse subsidies
Disrupted plans for own wallet, joint venture with Emtek and Ant for
DANA digital wallet
Tokopedia similar position and paired with Ovo
Infrastructure
Prospects
Databases
First mover advantage in the digitalisation of Warungs, currently c.39%
market share
Schulte Research
Leverage Big Data to provide added value in supply chain logistics and
financing
Analytics
BigQuery
Dataproc
Dataflow
Expand SaaS, logistics services, and financial services, building on top of
eCommerce platform to reach underserved population
Improve internet penetration and digitisation in non-Tier 1
AI
Sources: B
Bukalapak
kalapak p
public
blic filings
filings, Frost and Sulli
Sullivan
an
265
Indonesian digital landscape
Indonesia eCommerce Marketplace reached c.US$40 bn GMV in 2020
Key economic and eCommerce factors
Non-tier 1 access improving for Bukalapak
c.276m population, combined with young digitalised demographic
Non-tier 1 TPV as a % of Total TPV
c.66% unbanked or underbanked in Indonesia
70%
c.70% of ecommerce transactions from cities, where only c.10% of
population live
Rapidly growing internet-based economy: eCommerce GMV c.91%
increase from 2019 to 2020
61%
59%
Non-Tier 1 expected to contribute c.48% of Indonesian eCommerce market
in 2025E
2018
2019
2020
Indonesia digitalization poised to accelerate
High logistics costs for MSMEs especially, government rolling out Ecosystem Structuring National Logistics.
Initiating in Tier 1
Schulte Research
Government pushing to promote digitisation in Tier 2 and Tier 3
Non-Tier 1 currently more reliant on cash than Tier 1, unique opportunity for digital financial services
High barriers to entry in non-Tier 1, partnerships with Mitra and Warung provide Bukalapak competitive
advantage
Sources:Alpha JWC Ventures and Kearney Report, The Jakarta Post
266
Competitive landscape
Competitors better positioned to dominate eCommerce, Bukalapak unique selling proposition in O2O for MSMEs in non-Tier 1
Schulte Research
Competitive landscape
Visitors on the platform
1.
2.
3.
4.
5.
6.
Focus: O2O ecosystem for MSMEs in non-Tier 1 areas
GMV: c.US$3 bn GMV in 2020
eWallet: Partnered with DANA for eWallet through joint venture
Investor base: Backed by Emtek, Ant Group, GIC
Logistics: Increasing in-house logistics
Metrics: 14.3 m web visits and 7.0 m downloads in 2020
1.
2.
3.
4.
5.
6.
Focus: Local sellers & digital synergies, potential synergies with Gojek in
eCommerce, on-demand, and financial services
GMV: c.US$14 bn GMV in 2020
eWallet: Partnered with Ovo for eWallet through joint venture
Investor base: Merged with Gojek to form GoTo Group
Logistics: Outsource logistics via partnerships
Metrics: 356 m web visits and 16.3 m downloads in 2020
1.
2.
3.
4.
5.
6.
Focus: Fast-moving products in closed-loop ecosystem
GMV: c.US$14.2 bn GMV in 2020
eWallet: Proprietary eWallet
Investor base: Direct subsidiary Sea Ltd, regional dominance in SEA
Logistics: In-house logistics
Metrics: 391 m web visits and 37.9 m downloads in 2020
1.
2.
3.
4.
5.
6.
Focus: Premium products
GMV: c.US$4.5 bn GMV in 2020
eWallet: Proprietary eWallet
Investor base: Acquired by Alibaba, regional focus in local Indonesia
Logistics: In-house logistics via Lazada LeL Express
Metrics: 104 m web visits and 25.7 m downloads in 2020
First mover advantage in non-Tier 1
Low overlap due to MSMEs focus
No direct competitor in O2O space
!
!
!
Visitors from 01-May-21 to 31-Jul-2021
Visits Mobile
Visits Desktop
172.0 m
63.1 m
104.5 m
27.8 m
18.1 m
108.9 m
Bukalapak
Tokopedia
76.7 m
18.0 m
15.8 m
Shopee
Blibli
Lazada
3.8 m
14.4 m
6.2 m
11.8 m
3.0 m
12.7 m
Comparison key metrics
Scoring system (1-5): green (1/5)
Sea Ltd. / GoTo better potential super app
Higher take rate for MSMEs but lower
scalability potential
Limited expansion potential
yellow (3/5)
red (5/5)
Monthly visits
29.0m
156.2m
130.9m
27.3m
Monthly unique visitors
12.5m
49.8m
41.2m
11.1m
17.6m
9.3m
Visits / Unique visitors
2.32
3.14
3.18
2.46
1.9
Visit duration
03:51
06:29
06:14
05:45
02:54
Pages per visit
3.64
6.64
6.69
5.77
3.5
48.65%
41.40%
39.80%
49.63%
54.52%
Bounce rate
Sources: Similarweb
Similarweb, Momentum work,
work Bukalapak
ak
kp
publics filings
267
151
Chapter 5:
Case study – The fight for Southeast Asia:
Sea, Grab, and Payoneer
The last part of this book discusses the fintech battle for Southeast Asia. This involves
the big guns called Grab, SEA, and Payoneer.
Our analysis of this battle royale is remarkable because the geographical center is
Singapore, positioning itself along with Switzerland as a blockchain/crypto headquarters. Yet, we note that while all of these companies have globally competitive product
lines, solid features, and capable management, none possess any active and currently
usable blockchain technologies. This is perplexing. As with insurtech, we suggest that
this will require a substantial investment or partnerships with companies (like Linklogis) to advance blockchain solutions, especially in the area of working capital. This
is right up Payoneer’s alley.
Of the three Titans battling it out in Se Asia, we would lay our money on SEA.
Why? We can see from earlier parts of this book that so much of how digitizing financial data into tokenized assets tradable via crypto has already been found in the
world of avatars and video games. In our earlier book “The Digital Transformation of
Property in Greater China”, we noted that we are encountering the world of “Ready
Player One” already. The world of fully integrated avatars in self-sustaining financial
ecosystems is already here. The new and primitive world of non-fungible tokens is but
a small reflection.
152
Paul Schulte
In this way, SEA has a natural advantage as it was born in this world and can make
the leap to a blockchain-based financial world of funding digitized assets through
non-fiat currency. It can create purely digitized worlds for individual, and SME needs
both in finance and insurance. Further lifestyle needs which can be satisfied through
digital technology can stretch as far as the imagination. We are at the very early stages
of this journey.
This will be very expensive and will need talent. After its fund-raising activity,
SEA will have a war chest of $4 billion, and its business continues to be very cash flow
positive with a large and stable customer base. It has fuel to burn. On the other hand,
Grab has already spent $4 billion in capital for customer acquisition in many countries. Grab has been called out for shooting its numbers to reduce accounting losses.
This is fair as long as it comports with international accounting sleight of hand. It
must, however, show a path to profitability soon by offering an approach to consistent
profitability and a credible capex program. It continues to plow money into Indonesia
to compete head-on with Gojek. In light of Gojek’s acquisition of Tokopedia, this
substantially raises the stakes for Grab.
As for Payoneer, they have a very impressive footprint in SME activity. They
have taken a leaf from Alibaba, which cleverly created its payroll and “whereabouts”
employee app DingTalk. Payoneer has created a massive footprint with its SME
working capital app. For us, linking up Payoneer and Linklogis makes the greatest
sense. Linklogis has the technology, and Payoneer has the footprint in China and
Southeast Asia. Partnerships are the only solution for these companies, which, at
this point, can’t fix the engines in mid-air with blockchain solutions. They need to
look at the best in class in partnerships — Visa! Visa lends its platforms in exchange
for a myriad of benefits — footprint, technology, manpower, vision. Payoneer will
need to do this right. It will face more significant pressure to become a regulated
entity in each jurisdiction and, therefore, will need much more time to implement
multi-country solutions.
153
M O N E Y M E TAV E R S E
Schulte Research
Chapter 5: Case study The fight for southeast Asia:
Sea, Grab, and Payoneer
273
SMEs financing core data analytics in SEA
Different data, same desire for a credit product for SMEs
Key data sources
Financing/Payroll
Key data sources
eCommerce
Blockchain-based, vertically
integrated architecture: who
will set there first for c.600m
consumer and c.30m SMEs
Cross-border payments
Gaming vertical
Schulte Research
Financial (Seamoney)
Key data sources
Mobility
Food delivery
Financial services
Sources: Schulte Research
274
154
Paul Schulte
Grab
Schulte Research
Case Study
275
Case study 38 – Grab
Company overview
#1 super app in Indonesia catering to full spectrum of everyday needs
Business model
Go-to-market strategy
Key geographies: Vietnam, Myanmar, Thailand, the Philippines, Cambodia,
Malaysia, Singapore, and Indonesia
Key verticals: Delivery, Transportation, Carpooling, and Financial Services
Management trimmed outlook as vaccination rates in SEA lagging (i.e.,
c.26% in Thailand, c.14% in Vietnam and the Philippines)
Targets c.60% of SEA is unbanked or underbanked with 2x US population
Incentive-fuelled growth, disclosing adjusted net sales in public filings to
enhance public disclosures prospects
Recovery mobility service, sustained growth in the next five years, and
declining expenses in incentives required to sustain current valuation of
c.US$40 bn
Slower MTU growth but higher GMV per MTU, explained by network effect
Goals
Limitations
Super app in south-east Asia, similar to Alibaba or Tencent in China
Bleeding losses to fuel aggressive expansion both geographically and into
new verticals
Banking license in Singapore awarded in Q4 2020 ahead of Sea Ltd
Drivers classified as employees instead of contractors
Schulte Research
Payment licenses in 6/8 countries served (missing in Cambodia and
Myanmar)
c.60.4% voting power concentrated in CEO with 2.2% stake
Competitive landscape in SEA with firepower, including Sea that has
operations in Latin America, and GoTo (former Gojek)
High debt levels and recurrent capital injections required to sustain growth
Sources: Company public filings
(1) Jireh Chan Yi-Le estimates
276
Key verticals
COVID-19 pandemic fueled decline in mobility but strong growth in delivery services
Delivery
GMV grew 58% YoY to US$2.1 bn representing 53% of total GMV
Revenue up 92% YoY to US$45 m
Expanding into groceries delivery with GrabMart, GrabSupermarket, and GrabKitchens
Mobility
Mobility revenue up 129% to US$118m
Demand for mobility services severely impacted by COVID-19 pandemic, management expects demand to improve in
the coming quarters as vaccination rates increase across the region
Schulte Research
Financial services
Health
Financial services revenue up 156% to US$6 m requires substantial funding to reach scalability
Payments, lending, insurance, and wealth sub-verticals
Includes eWallet, Grab Pay Mastercard, BNPL services, working capital loans, and driver & consumer insurance
Latest development in the Health Industry as part of a joint venture with Ping An Good Doctor
Good Doctor offered in super app with prescriptions delivery
c. 30% stake in Good Doctor in Indonesia
Sources: Company public filings, Bloomberg
277
155
M O N E Y M E TAV E R S E
Sea Ltd.
Schulte Research
Case Study
278
Case study 39 – Sea
Company overview
Cash cross-pollination between Garena, Shopee, and SeaMoney to avoid leverage and equity injections
Business model
Go-to-market strategy
Technology conglomerate focused on south-east Asia
Garena game development studio fuelling Shopee and SeaMoney
expansion
Key verticals: eCommerce (Shopee), Financial services (SeaMoney), Video
games (Garena)
Targets rising middle class and unbanked or underbanked in south-east
Asia, Latin America, India, and expanding in Europe (Launch Shopee in
Poland)
Shopee reached self-sustained operating cash requirements, excess to fund
expansion of SeaMoney together with Garena
Overtook Tokopedia and Lazada as top eCommerce player in SEA and
Indonesia
Raising c.US$6 bn in Q3 2021, including US$2.5 bn in convertible note at
US$477
Consistently reinvesting proceeds to fuel business growth, even though Sea
could achieve profitability. Efficient internal capital allocation and external
through continuous equity injections
Schulte Research
Goals
Limitations
Expansion beyond south-east Asia, including eCommerce in Latin America
(Mercado Libre), India, and Europe
Requires banking licenses to enhance financial services products and
services in key markets
Currently seeking banking licenses, currently providing credit and financial
services for SMEs and digital wallet through SeaMoney
Requires significant cash injections in SeaMoney but has high upside
potential
Entered food delivery vertical (ShopeeFood) in Indonesia
Consistent share dilution due to recurrent equity injections, however
revenue per share growing steadily to counterbalance dilution effects
C.US$1 bn Venture Capital arm established to fund start-ups in SEA
Sources: Company public filings
279
Sea ecosystem development strategy
Internal cash injections from Garena and Shopee into SeaMoney and proven track record of allocating capital efficiently
Garena & Shopee cash injections to fuel
growth
Cash injections to launch and fuel
Ecosystem
Schulte Research
Future as super app?
Conglomerate focus on
digital technology?
eCommerce
Game
developer
Financial
services
Core Sea business:
c.US$4.6 bn in
FY2021E
Self-sustain operating
cash requirements;
c.US$4.8 bn FY2021E
Focus on digital
payments and
financial services
Sources: Company public filings
280
156
Paul Schulte
Payoneer
Schulte Research
Case Study
281
Case study 40 – Payoneer
Company overview
Exposure to China, representing c.34% of revenue in Q2 2021): adverse current macro conditions notably Evergrande
Business model
Go-to-market strategy
-to-
Cross-border payments and commerce-enabling platform to facilitates
management of international payments in over 200 countries
Focus on batch payments and customers with at least c.US$20 k monthly
transaction volume
Transaction-based revenue model with take rate up to c.3% of transaction
volume
Targets SMEs and emerging markets by offering monthly fees on top of
current take rate
Ancillary revenue streams in working capital solutions, tax solutions, risk
management, card issuance, and FX solutions
Key competitive advantages in number of currency routes and batch
payments facilitator
Goals
Limitations
Centralize payments possibilities on end-to-end payments platform to
facilitate cross-border payments (e.g., acquisition Optile in 2020)
Margins reducing as volume is growing faster than transaction revenue
Regulation risks for merchant capital advances considered as lending
product
Increase Payoneer debit card issuance through MasterCard
Schulte Research
Targeted acquisitions to enhance technology stack and growth
Competes with incumbents and prominent Fintech including PayPal, Wise,
Stripe, and Bitwise
Achieve c.20% EBITDA margin while maintaining c.20% organic growth
Concentration risk by relying on specific partnerships (e.g., Amazon
generating c.26% of revenue) or geographical coverage (e.g., China)
generating c.34% of revenue
Sources: Company public filings
282
Payoneer core foundations
Technology stack, ancillary services, and established payments underpin high barriers to entry
Global banking infrastructure
Smart routing platform
100+ countries local clearing
Risk & Compliance
CRM indicators
API access across platform
300 k applications monthly
Accounting/ERP/Partner integrations
Localized global account management
Scaled regional operations
Lorem ipsum
Secured and scaled technology
Global SME onboarding and underwriting
Global operations
Schulte Research
Data & Machine learning
Fraud management and WC underwriting
models
Regulatory infrastructure
Regulated across key markets
Licensed MasterCard issuer
Comprehensive AML program
Sources: Company public filings
283
157
Index of companies
Case study 1 – PayPal in the crypto space
Case study 2 – Visa in the crypto space
Case study 3 – Coinbase
Case study 4 – Silvergate
Case study 5 – Sygnum
Case study 6 – Circle
Case study 7 – Bullish
Case study 8 – PayPal
Case study 9 – Visa
Case study 10 – Mastercard
Case study 11 – Square
Case study 12 – Marqeta
Case study 13 – SoFi
Case study 14 – Robinhood
Case study 15 – Wise
Case study 16 – Flywire
Case study 17 – Tencent
Case study 18 – Ant Group
Case study 19 – Acorns
Case study 20 – Trustly
Case study 21 – Metromile
Case study 22 – Amwell
Case study 23 – Lemonade
Case study 24 – Oscar Health
Case study 25 – Root Insurance
Case study 26 – Clover Health
Case study 27 – Bright Health
Case study 28 – Apple
Case study 29 – Acko
Case study 30 – BIMA
Case study 31 – NEXT
Case study 32 – Shift
Case study 33 – Hippo
Case study 34 – Ping An
Case study 35 – Linklogis
Case study 36 – Compass
Case study 37 – Bukalapak
Case study 38 – Grab
Case study 39 – Sea
Case study 40 – Payoneer