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India’s most popular services are becoming super apps

Posted by on May 11, 2019 in Apps, Asia, China, Cloud, Developer, Facebook, Finance, Flipkart, Food, Foodpanda, Gaana, Gaming, grab, haptik, hike, India, MakeMyTrip, Media, Microsoft, microsoft garage, Mobile, Mukesh Ambani, mx player, payments, Paytm, paytm mall, reliance jio, saavn, SnapDeal, Social, Startups, Tapzo, Tencent, Times Internet, Transportation, Truecaller, Uber, Vijay Shekhar Sharma, WeChat | 0 comments

Truecaller, an app that helps users screen strangers and robocallers, will soon allow users in India, its largest market, to borrow up to a few hundred dollars.

The crediting option will be the fourth feature the nine-year-old app adds to its service in the last two years. So far it has added to the service the ability to text, record phone calls and mobile payment features, some of which are only available to users in India. Of the 140 million daily active users of Truecaller, 100 million live in India.

The story of the ever-growing ambition of Truecaller illustrates an interesting phase in India’s internet market that is seeing a number of companies mold their single-functioning app into multi-functioning so-called super apps.

Inspired by China

This may sound familiar. Truecaller and others are trying to replicate Tencent’s playbook. The Chinese tech giant’s WeChat, an app that began life as a messaging service, has become a one-stop solution for a range of features — gaming, payments, social commerce and publishing platform — in recent years.

WeChat has become such a dominant player in the Chinese internet ecosystem that it is effectively serving as an operating system and getting away with it. The service maintains its own app store that hosts mini apps and lets users tip authors. This has put it at odds with Apple, though the iPhone-maker has little choice but to make peace with it.

For all its dominance in China, WeChat has struggled to gain traction in India and elsewhere. But its model today is prominently on display in other markets. Grab and Go-Jek in Southeast Asian markets are best known for their ride-hailing services, but have begun to offer a range of other features, including food delivery, entertainment, digital payments, financial services and healthcare.

The proliferation of low-cost smartphones and mobile data in India, thanks in part to Google and Facebook, has helped tens of millions of Indians come online in recent years, with mobile the dominant platform. The number of internet users has already exceeded 500 million in India, up from some 350 million in mid-2015. According to some estimates, India may have north of 625 million users by year-end.

This has fueled the global image of India, which is both the fastest growing internet and smartphone market. Naturally, local apps in India, and those from international firms that operate here, are beginning to replicate WeChat’s model.

Founder and chief executive officer (CEO) of Paytm Vijay Shekhar Sharma speaks during the launch of Paytm payments Bank at a function in New Delhi on November 28, 2017 (AFP PHOTO / SAJJAD HUSSAIN)

Leading that pack is Paytm, the popular homegrown mobile wallet service that’s valued at $18 billion and has been heavily backed by Alibaba, the e-commerce giant that rivals Tencent and crucially missed the mobile messaging wave in China.

Commanding attention

In recent years, the Paytm app has taken a leaf from China with additions that include the ability to text merchants; book movie, flight and train tickets; and buy shoes, books and just about anything from its e-commerce arm Paytm Mall . It also has added a number of mini games to the app. The company said earlier this month that more than 30 million users are engaging with its games.

Why bother with diversifying your app’s offering? Well, for Vijay Shekhar Sharma, founder and CEO of Paytm, the question is why shouldn’t you? If your app serves a certain number of transactions (or engagements) in a day, you have a good shot at disrupting many businesses that generate fewer transactions, he told TechCrunch in an interview.

At the end of the day, companies want to garner as much attention of a user as they can, said Jayanth Kolla, founder and partner of research and advisory firm Convergence Catalyst.

“This is similar to how cable networks such as Fox and Star have built various channels with a wide range of programming to create enough hooks for users to stick around,” Kolla said.

“The agenda for these apps is to hold people’s attention and monopolize a user’s activities on their mobile devices,” he added, explaining that higher engagement in an app translates to higher revenue from advertising.

Paytm’s Sharma agrees. “Payment is the moat. You can offer a range of things including content, entertainment, lifestyle, commerce and financial services around it,” he told TechCrunch. “Now that’s a business model… payment itself can’t make you money.”

Big companies follow suit

Other businesses have taken note. Flipkart -owned payment app PhonePe, which claims to have 150 million active users, today hosts a number of mini apps. Some of those include services for ride-hailing service Ola, hotel booking service Oyo and travel booking service MakeMyTrip.

Paytm (the first two images from left) and PhonePe offer a range of services that are integrated into their payments apps

What works for PhonePe is that its core business — payments — has amassed enough users, Himanshu Gupta, former associate director of marketing and growth for WeChat in India, told TechCrunch. He added that unlike e-commerce giant Snapdeal, which attempted to offer similar offerings back in the day, PhonePe has tighter integration with other services, and is built using modern architecture that gives users almost native app experiences inside mini apps.

When you talk about strategy for Flipkart, the homegrown e-commerce giant acquired by Walmart last year for a cool $16 billion, chances are arch rival Amazon is also hatching similar plans, and that’s indeed the case for super apps.

In India, Amazon offers its customers a range of payment features such as the ability to pay phone bills and cable subscription through its Amazon Pay service. The company last year acquired Indian startup Tapzo, an app that offers integration with popular services such as Uber, Ola, Swiggy and Zomato, to boost Pay’s business in the nation.

Another U.S. giant, Microsoft, is also aboard the super train. The Redmond-based company has added a slew of new features to SMS Organizer, an app born out of its Microsoft Garage initiative in India. What began as a texting app that can screen spam messages and help users keep track of important SMSs recently partnered with education board CBSE in India to deliver exam results of 10th and 12th grade students.

This year, the SMS Organizer app added an option to track live train schedules through a partnership with Indian Railways, and there’s support for speech-to-text. It also offers personalized discount coupons from a range of companies, giving users an incentive to check the app more often.

Like in other markets, Google and Facebook hold a dominant position in India. More than 95% of smartphones sold in India run the Android operating system. There is no viable local — or otherwise — alternative to Search, Gmail and YouTube, which counts India as its fastest growing market. But Google hasn’t necessarily made any push to significantly expand the scope of any of its offerings in India.

India is the biggest market for WhatsApp, and Facebook’s marquee app too has more than 250 million users in the nation. WhatsApp launched a pilot payments program in India in early 2018, but is yet to get clearance from the government for a nationwide rollout. (It isn’t happening for at least another two months, a person familiar with the matter said.) In the meanwhile, Facebook appears to be hatching a WeChatization of Messenger, albeit that app is not so big in India.

Ride-hailing service Ola too, like Grab and Go-Jek, plans to add financial services such as credit to the platform this year, a source familiar with the company’s plans told TechCrunch.

“We have an abundance of data about our users. We know how much money they spend on rides, how often they frequent the city and how often they order from restaurants. It makes perfect sense to give them these valued-added features,” the person said. Ola has already branched out of transport after it acquired food delivery startup Foodpanda in late 2017, but it hasn’t yet made major waves in financial services despite giving its Ola Money service its own dedicated app.

The company positioned Ola Money as a super app, expanded its features through acquisition and tie ups with other players and offered discounts and cashbacks. But it remains behind Paytm, PhonePe and Google Pay, all of which are also offering discounts to customers.

Integrated entertainment

Super apps indeed come in all shapes and sizes, beyond core services like payment and transportation — the strategy is showing up in apps and services that entertain India’s internet population.

MX Player, a video playback app with more than 175 million users in India that was acquired by Times Internet for some $140 million last year, has big ambitions. Last year, it introduced a video streaming service to bolster its app to grow beyond merely being a repository. It has already commissioned the production of several original shows.

In recent months, it has also integrated Gaana, the largest local music streaming app that is also owned by Times Internet. Now its parent company, which rivals Google and Facebook on some fronts, is planning to add mini games to MX Player, a person familiar with the matter said, to give it additional reach and appeal.

Some of these apps, especially those that have amassed tens of millions of users, have a real shot at diversifying their offerings, analyst Kolla said. There is a bar of entry, though. A huge user base that engages with a product on a daily basis is a must for any company if it is to explore chasing the super app status, he added.

Indeed, there are examples of companies that had the vision to see the benefits of super apps but simply couldn’t muster the requisite user base. As mentioned, Snapdeal tried and failed at expanding its app’s offerings. Messaging service Hike, which was valued at more than $1 billion two years ago and includes WeChat parent Tencent among its investors, added games and other features to its app, but ultimately saw poor engagement. Its new strategy is the reverse: to break its app into multiple pieces.

“In 2019, we continue to double down on both social and content but we’re going to do it with an evolved approach. We’re going to do it across multiple apps. That means, in 2019 we’re going to go from building a super app that encompasses everything, to Multiple Apps solving one thing really well. Yes, we’re unbundling Hike,” Kavin Mittal, founder and CEO of Hike, wrote in an update published earlier this year.

And Reliance Jio, of course

For the rest, the race is still on, but there are big horses waiting to enter to add further competition.

Reliance Jio, a subsidiary of conglomerate Reliance Industry that is owned by India’s richest man, Mukesh Ambani, is planning to introduce a super app that will host more than 100 features, according to a person familiar with the matter. Local media first reported the development.

It will be fascinating to see how that works out. Reliance Jio, which almost single-handedly disrupted the telecom industry in India with its low-cost data plans and free voice calls, has amassed tens of millions of users on the bouquet of apps that it offers at no additional cost to Jio subscribers.

Beyond that diverse selection of homespun apps, Reliance has also taken an M&A-based approach to assemble the pieces of its super app strategy.

It bought music streaming service Saavn last year and quickly integrated it with its own music app JioMusic. Last month, it acquired Haptik, a startup that develops “conversational” platforms and virtual assistants, in a deal worth more than $100 million. It already has the user bases required. JioTV, an app that offers access to over 500 TV channels; and JioNews, an app that additionally offers hundreds of magazines and newspapers, routinely appear among the top apps in Google Play Store.

India’s super app revolution is in its early days, but the trend is surely one to keep an eye on as the country moves into its next chapter of internet usage.


Source: The Tech Crunch

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Ysplit wants to make it so you never owe your friends money again

Posted by on Mar 13, 2019 in payments, Y Combinator, ysplit | 0 comments

When you live with roommates or go out often with friends, it’s common for someone to front the payment — be that for utilities, the cable bill, rent or the restaurant bill — and have everyone else pay them back via cash, Venmo or Apple Pay. But Ysplit, a company launching out of Y Combinator, wants to make it so you never have to owe anyone ever again.

It works by creating a virtual card that automatically deducts money from everyone’s bank account. So, the person who usually fronts the payment would instead use Ysplit’s virtual card.

“We front the payment and as we’re fronting payment, we’re ensuring everyone on the card has enough money,” Ysplit co-founder Tunde Alao told TechCrunch. “We authorize the payment and then charge everyone at the same time.”

Ysplit is totally free to users but makes money through interchange fees. Since the payment happens through Ysplit’s card, it’s able to charge the utility provider between 1.3 to 2 percent of the transaction.

Ysplit spun out of Alao and his co-founders’ first startup, Cluttr. While the three of them were interning at Google, they shared a house and came up with the idea to help them organize their shared finances.

“We created something to track how much we owed each other,” Alao said. “It got quite popular in the U.K. but we realized we’re not solving any problem by helping people track how much they owe each other. We wanted to stop people from owing each other entirely.”

Cluttr, which Alao said was similar to Splitwise, was basically Splitwise plus scheduling. Splitwise allows you to easily track bills and other expenses with friends. There are numerous other apps that make it easy to track how much you owe someone, but few — if any — that let you so easily split the expenses upfront.

Ysplit is currently in closed beta with about 40 households using the product. After Y Combinator demo day next week, Ysplit will roll out the app to an additional 500 people. Ysplit is initially focused on utility payments for roommates, but plans to add additional service providers down the road.

“It scales into a lot of situations,” Alao said.


Source: The Tech Crunch

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Facebook wants up to 30% of fan subscriptions vs Patreon’s 5%

Posted by on Feb 26, 2019 in Apps, Creators, eCommerce, Facebook, Facebook Creators, Patreon, payments, Social, TC, twitch, YouTube | 0 comments

Facebook will drive a hard bargain with influencers and artists judging by the terms of service for the social network’s Patreon-like Fan Subscriptions feature that lets people pay a monthly fee for access to a creator’s exclusive content. The policy document attained by TechCrunch shows Facebook plans to take up to a 30 percent cut of subscription revenue minus fees, compared to 5 percent by Patreon, 30 percent by YouTube, which covers fees and 50 percent by Twitch.

Facebook also reserves the right to offer free trials to subscriptions that won’t compensate creators. And Facebook demands a “non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use” creators’ content and “This license survives even if you stop using Fan Subscriptions.”

Distrust of Facebook could scare creators away from the platform when combined with its significant revenue share and ability to give away or repurpose creators’ content. Facebook has consistently shown that it puts what it thinks users want and its own interests above those of partners. It cut off game developers from viral channels, inadequately warned Page owners their reach would drop over time, decimated referral traffic to news publishers and, most recently, banished video makers from the feed. If Facebook wants to win creators’ trust and the engagement of their biggest fans, it may need a more competitive offering with larger limits on its power.

“Facebook reached out to offer Hard Drive early access to a ‘fan subscription’ product” tweeted Matt Saincome, who also runs satirical news site The Hard Times. “I asked my editors about it and the complete distrust amongst our team was kinda funny. We read through the terms and found a couple things that were hilarious when compared to Patreon’s 5% . . . Up to 30% and the rights to all our stuff? From the people who let us build an audience on their platform before pulling it out from under our feet? Hilarious. Here’s a crazy alternative: let people who signed up to see our content see it and then we can monetize that hahah.”

Instagram is refocusing on creators too. Instagram’s Android app reveals the prototype of a feature that lets users switch their profile into a Creator Account, similar to the Business Profiles it launched in 2016. Instagram first told The Hollywood Reporter about Creator Accounts in December, but now it’s showing up in the code. Reverse-engineering specialist Jane Manchun Wong generated this screenshot showing the option for Creator Accounts to hide their contact info or profile category. Fellow code digger Ishan Agarwal gave TechCrunch an exclusive look at the Instagram code that shows the Creator Accounts are “Best for public figures, content producers, artists, and influencers.” Creator Accounts give users “more advanced insights and reach more people with promotions,” “more growth tools” and “a new inbox that makes it easier to manage message requests and connect with fans.”

Trading control for subscribers

Facebook began testing Fan Subscriptions a year ago to give creators a financial alternative to maximizing ad views after watching the rise of Patreon, which now has 3 million patrons who’ll pay 100,000 artists, comedians, models and makers more than $500 million this year. This month Facebook expanded the test to the U.K., Spain, Germany and Portugal to allow users to pay $4.99 per month to a creator for exclusive content, live videos and a profile badge that highlights them as a subscriber. While Twitch owns gamers, YouTube rules amongst videographers and Patreon is a favorite with odd-ball creators, Facebook may see an opportunity to popularize Fan Subscriptions internationally and turn mainstream consumers into paid supporters.

The terms for Fan Subscriptions are not publicly available, and only visible on Facebook’s site to Pages it’s invited to test the feature. But TechCrunch has published the full policy document below.

Thankfully, Facebook isn’t taking a cut of Fan Subscription revenue during the test phase, and creators get to keep 100 percent of the money paid by any patrons it signs up before the official launch. Facebook tells me that it hasn’t finalized its percentage cut, though the terms permit it to take as much as 30 percent. That would qualify, given Facebook tells me its rake will be in line with industry standards and creators will retain the majority of their earnings.

But whatever cut it takes will be after processing fees and the 15 to 30 percent tax Apple and Google levy on iOS and Android in-app purchases. We’ll see if Facebook tries a workaround that pushes users to their mobile browser where it can take their subscription money tax-free. And if Facebook decides it want to give users a free one-month trial or discount to any creator, they can’t stop it even if that lets people download all their exclusive content and then cancel without ever paying.

But what’s sure to raise the most hairs is the clause about “Supplemental Data” that gives Facebook a license to display a creator’s content as they might expect, but also a royalty-free license to use it however they want, even after a creator abandons Facebook Fan Subscriptions. A Facebook spokesperson confirmed that Supplemental Data does in fact cover all content provided by the creator. They claim it’s so if a creator made a custom fan sticker, a subscriber could use it in their own Facebook post, but the rule gives Facebook vast power beyond that. Patreon has a similar clause, but gets the benefit of the doubt in a way Facebook doesn’t after so many scandals.

Facebook’s spokesperson claimed that the Supplemental Data terms were similar to Facebook’s standard terms, but the normal Facebook terms say “You can end this license any time by deleting your content or account.” Not so with Fan Subscriptions. I don’t expect Facebook is going to try to outright steal and resell creators’ content, but it will have jurisdiction to use their art however it wants to fuel its war with Patreon, Twitch and YouTube.

Creators will have to decide whether access to Facebook’s 2.3 billion users is worth the platform risk of building a following somewhere they don’t control and that has other business priorities. If Facebook’s strategy suddenly veers away from Fan Subscriptions, it could be hard for creators to score new signups or retain their old ones. At least with a dedicated site like Patreon, creators know the platform can’t abuse them without the threaten of ruin.

Here’s the full Terms of Service for Facebook’s Patreon competitor Fan Subscriptions:

Fan Subscriptions creator terms

The fan funding feature (“Fan Subscriptions”) allows Facebook users to support their favorite pages, creators, group administrators, gamers, or others (“Pages”) through a monthly subscription with Facebook (“Subscription”) that gives those people (“fans”) access to digital content offered by Pages, such as exclusive digital content, fan recognition, and merchandise discounts. These Terms (“Terms”) govern how Pages use Fan Subscriptions.

With regard to your use of Fan Subscriptions, you agree to the following:

  1. Your use of the Platform with respect to Fan Subscriptions is subject to, and you agree to comply with, the Platform Policy currently available at https://developers.facebook.com/policy/.
  2. Your use of Fan Subscriptions to offer digital content and/or services to Facebook fans is subject to, and you agree to comply with the (a) Monetization Eligibility Standards currently available at https://www.facebook.com/help/publisher/169845596919485, and (b) Content Guidelines for Monetization currently available at https://www.facebook.com/facebookmedia/get-started/monetization_contentguidelines. You agree to follow any additional instructions and/or technical documentation we provide to you for Fan Subscriptions.
  3. You will provide accurate information to fans in connection with your use of Fan Subscriptions, including but not limited as part of any digital content or services you choose to offer to them. You must clearly and conspicuously disclose all material terms regarding your offer and the nature of content or services you will provide to fans once they choose to subscribe. You agree to comply with all laws applicable to your use of Fan Subscriptions.
  4. You confirm that the content you offer via Subscription does not infringe upon the intellectual property rights of any third party and that you have secured all rights necessary to distribute, copy, display, publicly perform, or otherwise use the content.
  5. You will not use, incorporate, or provide any music or physical goods in connection with your use of Fan Subscriptions without FB’s prior written approval (email is sufficient).
  6. You will not offer discounts on physical goods that exceed 80 percent of the offered goods’ retail value.
  7. Your fans’ Subscriptions may be processed as payments to Facebook via Apple’s In-App Purchase or Google’s In-App Billing services, which are subject to Apple’s and Google’s separate payment terms and conditions. Apple and Google may charge Facebook a revenue share and/or other fees for such payment services according to their respective terms and conditions. FB will pay you a revenue share calculated as a percentage (“Your Share”) of what’s left after deduction of those fees/charges and of any other fees or taxes incurred by Facebook. As a the date of these Terms, Your Share of that net revenue is 100%. However, Facebook may in the future change these Terms such that Facebook keeps a revenue share of up to 30%. We will give 30 days’ notice of any such change.
  8. Facebook reserves the right to offer discounted and free trials for fans from time to time in our discretion, whether to incentivize Subscription sign-ups or otherwise. Where we do so in relation to your Fan Subscriptions, your revenue share will be reduced accordingly: we only pay you a revenue share based on the amounts fans actually pay (less fees and taxes we incur).
  9. If you have accurately completed and timely provided to FB any forms or documentation that FB reasonably determines are required to set up payment to you, and subject to and only in the event that you are in compliance in all respects with these Terms, payment of any net amounts FB receives from Apple and Google for Subscriptions made by your fans during your use of Fan Subscriptions will be on a monthly basis, within approximately 60 days after the end of the applicable month. Facebook will not be responsible for any subsequent fees applied by your financial institution to complete payment of the Monthly Fee to you. Furthermore, in the event the payment due to you would be less than One Hundred U.S. Dollars ($100.00), Facebook reserves the right to roll such payment over month to month until such payment threshold is met, at which time Facebook will make the applicable payment to you. Facebook also reserves the right to set off and/or withhold any amounts that Facebook reasonably considers are or are likely to be payable by you to Facebook under these Terms (including under any indemnities).
  10. .If you are providing (or allowing us to access) any data, content, or other information in connection with your use of Fan Subscriptions (collectively, “Supplemental Data”), then you grant us (and our affiliates) a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use such Supplemental Data. This license survives even if you stop using Fan Subscriptions. You are responsible for obtaining the necessary rights from all applicable rights holders to grant this license.
  11. You are responsible for paying any applicable taxes owed with respect to any amounts you receive through your use of Fan Subscriptions. Facebook will charge you taxes with respect to such amounts if it is required to do so under applicable law.
  12. .Facebook can terminate or suspend your use of Fan Subscriptions at any time in our sole discretion, and we may change or stop offering Fan Subscriptions at any time in our sole discretion. In no event will we be liable in any way for terminating or suspending your use of Fan Subscriptions, for the discontinuation of Fan Subscriptions, for the removal of or disabling of access to content, or for the withdrawal of the content or Fan Subscriptions.
  13. .If you change what’s included in a Subscription in a way that could be considered material, you must give fans reasonable prior notice such that they have a reasonable opportunity to cancel their Subscriptions if they so choose, with the change only taking effect after their next Subscription fee payment.
  14. .If you are using Fan Subscription on behalf of a third party (including, but not limited to, as an agent or representative of a Creator), you represent and warrant that you have the authority as agent of such party to use such features on their behalf, agree to these Terms, and hereby bind such party to these Terms. You agree to indemnify and hold Facebook harmless from any claims, suits, losses, liabilities, damages, costs, and expenses resulting from your breach of the Terms. If you are accepting these Terms as admin of Facebook Business Manager for your business, these Terms shall apply to Content on all Facebook Pages and profiles owned or operated by your business at the time of acceptance and thereafter.
  15. .By using the Fan Subscriptions feature, you agree that we may communicate with you electronically any important information regarding your use of Fan Subscriptions, including without limitation as to Your Share and any payments. We may also provide notices to you by posting them on our website, or by sending them to an email address or street address that you previously provided to us. Website and email notices shall be considered received by you within 24 hours of the time posted or sent; notices by postal mail shall be considered received within three (3) business days of the time sent.
  16. .Facebook reserves the right to update these Terms from time to time. If any change to these Terms will materially disadvantage you, or materially affect the availability of the Subscription, we will provide you with notice before the changes become effective and you can choose to cancel your Subscription. Your continued use of this feature constitutes acceptance of those changes.
  17. .Fan Subscriptions is part of the “Facebook Products” under Facebook’s Terms of Service (“Facebook Terms”), and your use of Fan Subscriptions is deemed part of your use of Facebook Products. In the event of any express conflict between these Terms and the Facebook Terms, these Terms will govern solely with respect to your use of Fan Subscriptions and solely to the extent of the conflict. These Terms do not alter in any way the terms or conditions of any other agreement you may have with Facebook. Facebook reserves the right to monitor or audit your compliance with these Terms and to update these terms from time to time, and your continued use of Fan Subscriptions constitutes acceptance of those changes.


Source: The Tech Crunch

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The plot to revive Mt. Gox and repay victims’ Bitcoin

Posted by on Feb 7, 2019 in Apps, Banking, Bitcoin, blockchain, Brock Pierce, coinlab, cryptocurrency, cryptocurrency exchange, Developer, Gox Rising, Lawsuit, Mt. Gox, payments, peter vessenes, Security, Startups, Sunlot, TC | 0 comments

It was the Lehman Brothers of blockchain. 850,000 Bitcoin disappeared when cryptocurrency exchange Mt. Gox imploded in 2014 after a series of hacks. The incident cemented the industry’s reputation as frighteningly insecure. Now a controversial crypto celebrity named Brock Pierce is trying to get the Mt. Gox flameout’s 24,000 victims their money back and build a new company from the ashes.

Pierce spoke to TechCrunch for the first interview about Gox Rising — his plan to reboot the Mt. Gox brand and challenge Coinbase and Binance for the title of top cryptocurrency exchange. He claims there’s around $630 million and 150,000 Bitcoin are waiting in the Mt. Gox bankruptcy trust, and Pierce wants to solve the legal and technical barriers to getting those assets distributed back to their rightful owners.

The consensus from several blockchain startup CEOs I spoke with was that the plot is “crazy”, but that it also has the potential to right one of the biggest wrongs marring the history of Bitcoin.

The Fall Of Mt. Gox

The story starts with Magic: The Gathering. Mt. Gox launched in 2006 as a place for players of the fantasy card game to trade monsters and spells before cryptocurrency came of age. The Magic: The Gathering Online eXchange wasn’t designed to safeguard huge quantities of Bitcoin from legions of hackers, but founder Jed McCaleb pivoted the site to do that in 2010. Seeking to focus on other projects, he gave 88 percent of the company to French software engineer Mark Karpeles, and kept 12 percent. By 2013, the Tokyo-based Mt. Gox had become the world’s leading cryptocurrency exchange, handling 70 percent of all Bitcoin trades. But security breaches, technology problems, and regulations were already plaguing the service.

Then everything fell apart. In February 2014, Mt. Gox halted withdrawls due to what it called a bug in Bitcoin, trapping assets in user accounts. Mt. Gox discovered that it had lost over 700,000 Bitcoins due to theft over the past few years. By the end of the month, it had suspended all trading and filed for bankruptcy protection, which would contribute to a 36 percent decline in Bitcoin’s price. It admitted that 100,000 of its own Bitcoin atop 750,000 owned by customers had been stolen.

Mt. Gox is now undergoing bankruptcy rehabilitation in Japan overseen by court-appointed trustee and veteran bankruptcy lawyer Nobuaki Kobayashi to establish a process for compensating the 24,000 victims who filed claims. There’s now 137,892 Bitcoin, 162,106 Bitcoin Cash, and some other forked coins in Mt. Gox’s holdings, along with $630 million cash from the sale of 25 percent of the Bitcoin that Kobayashi handled at a precient price point above where it is today. But five years later, creditors still haven’t been paid back. 

A Rescue Attempt

Brock Pierce, the eccentric crypto celebrity

Pierce had actually tried to acquire Mt. Gox in 2013. The child actor known from The Mighty Ducks had gone on to work with a talent management company called Digital Entertainment Network. But accusations of sex crimes led Pierce and some team members to flee the US to Spain until they were extradited back. Pierce wasn’t charged and paid roughly $21,000 to settle civil suits, but his cohorts were convicted of child molestation and child pornography.

The situation still haunts Pierce’s reputation and makes some in the industry apprehensive to be associated with him. But he managed to break into the virtual currency business, setting up World Of Warcraft gold mining farms in China. He claims to have eventually run the world’s largest exchanges for WOW Gold and Second Life Linden Dollars.

Soon Pierce was becoming a central figure in the blockchain scene. He co-founded Blockchain Capital, and eventually the EOS Alliance as well as a much-derided “crypto utopia” in Puerto Rico called Sol. His eccentric, Burning Man-influenced fashion made him easy to spot at the industry’s many conferences.

As Bitcoin and Mt. Gox rose in late 2012, Pierce tried to buy it, but “my biggest investor was Goldman Sachs. Goldman was not a fan of me buying the biggest Bitcoin exchange” due to the regulatory issues, Pierce tells me. But he also suspected the exchange was built on a shaky technical foundation that led him to stop pursuing the deal. “I thought there was a big risk factor in the Mt. Gox back-end. That was my intuition and I’m glad it was because my intuition was dead right.”

After Mt. Gox imploded, Pierce claims his investment group Sunlot Holdings successfully bought founder McCaleb’s 12 percent stake for 1 Bitcoin, though McCaleb says he didn’t receive the Bitcoin and it’s not clear if the deal went through. Pierce also claims he had a binding deal with Karpeles to buy the other 88 percent of Mt. Gox, but that Karpeles tried to pull out of the deal that remains in legal limbo.

The Supposed Villain

Sunlot has since been trying to take over the rehabilitation proceedings, but that arrangement was derailed by a lawsuit from CoinLab. That company had partnered with Mt. Gox in 2012 to run its North American operations but claimed it never received the necessary assets, and sued Mt. Gox for $75 million. Mt. Gox countersued, saying CoinLab wasn’t legally certified to run the exchange in the US and that it hadn’t returned $5.3 million in customer deposits. For a detailed account the tangle of lawsuits, check out Reuters’ deep-dive into the Mt. Gox fiasco.

CoinLab co-founder Peter Vessenes

This week, CoinLab co-founder Peter Vessenes increased the claim and is now seeking $16 billion. Pierce alleges “this is a frivolous lawsuit. He’s claiming if [the partnership with Mt. Gox] hadn’t been cancelled, CoinLab would have been Coinbase and is suing for all the value. He believes Coinbase is worth $16 billion so he should be paid $16 billion. He embezzled money from Mt. Gox, he committed a crime, and he’s trying to extort the creditors. He’s holding up the entire process hoping he’ll get a payday.” Later, Pierce reiterated that “Coinlab is the villain trying to take all the money and see creditors get nothing.” Industry sources I spoke to agreed with that characterization

Mt. Gox customers worried that they might only receive the cash equivalent of their Bitcoin according to the currency’s $483 value when Gox closed in 2014. That’s despite the rise in Bitcoin’s value rising to around 7X that today, and as high as 40X at the currency’s peak. Luckily, in June 2018 a Japanese District Court halted bankruptcy proceedings and sent Mt. Gox into civil rehabilitation which means the company’s assets would be distributed to its creditors (the users) instead of liquidated. It also declared that users would be paid back their lost Bitcoin rather than the old cash value.

The Plan For Gox Rising

Now Pierce and Sunlot are attempting another rescue of Mt. Gox’s  $1.2 billion assets. He wants to track down the remaining cryptocurrency that’s missing, have it all fairly valued, and then distribute the maximum amount to the robbed users with Mt. Gox equity shareholders including himself receiving nothing.

That’s a much better deal for creditors than if Mt. Gox paid out the undervalued sum, and then shareholders like Pierce got to keep the remaining Bitcoins or proceeds of their sale at today’s true value. “I‘ve been very blessed in my life. I did commit to giving my first billion away” Pierce notes, joking that this plan could account for the first $700 million he plans to ‘donate’.

“Like Game Of Thrones, the last season of Mt. Gox hasn’t been written” Pierce tells me, speaking in terms HBO’s Silicon Valley would be quick to parody. “What kind of ending do we want to make for it? I’m a Joseph Campbell fan so I’m obviously going to go with a hero’s journey, with a rise and a fall, and then a rise from the ashes like a phoenix.”

But to make this happen, Sunlot needs at least half of those Mt. Gox users seeking compensation, or roughly 12,000 that represent the majority of assets, to sign up to join a creditors committee. That’s where GoxRising.com comes in. The plan is to have users join the committee there so they can present a united voice to Kobayashi about how they want Mt. Gox’s assets distributed. “I think that would allow the process to move faster than it would otherise” Pierce says. “Things are on track to be resolved in the next three to five years. If [a majority of creditors sign on] this could be resolved in maybe 1 year.”

Beyond providing whatever the Mt. Gox estate pays out, Pierce wants to create a Gox Coin that gives original Mt. Gox creditors a stake in the new company. He plans to have all of Mt. Gox’s equity wiped out, including his own. Then he’ll arrange to finance and tokenize an independent foundation governed by the creditors that will seek to recover additional lost Mt. Gox assets and then distribute them pro rata to the Gox Coin holders. There are plenty of unanswered questions about the regulatory status of a Gox Coin and what holders would be entitled to, Pierce admits.

Meanwhile, Pierce is bidding to buy the intangibles of Mt. Gox, aka the brand and domain. He wants to then relaunch it as a Gox or Mt. Gox exchange that doesn’t provide custody itself for higher security. Despite the recent crypto recession with prices at multi-year lows, he believes there’s room for another exchange with a brand tied to the early heyday of Bitcoin.

“We want to offer [creditors] more than the bankruptcy trustee can do on its own” Pierce tells me. He concedes that the venture isn’t purely altruistic. “If the exchange is very successful I stand to benefit sometime down the road.” Even if the revived Mt. Gox never rises to legitimately challenge Binance, Coinbase, and other leading exchanges, Piece believes it’s all worth the effort. He concludes, “Whether we’re successful or not, I want to see the creditors made whole.” Those creditors will have to decide for themselves who to trust.


Source: The Tech Crunch

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PayPal revenues miss but growth is strong from new acquisitions

Posted by on Jan 30, 2019 in Earnings, payments, PayPal, TC | 0 comments

PayPal revenues missed, but strong growth from its recent iZettle and Hyperwallet acquisitions and booming business at Venmo point to a strong outlook for the payments giant.

In all, PayPal saw revenues for the quarter of $4.23 billion against analysts’ estimates of $4.24 billion, according to data from Yahoo Finance. Earnings per share at the company were up to 69 cents versus analysts’ expectations of 62 cents on a non-GAAP basis.

For the full year, PayPal saw revenue hit $15.45 billion versus analysts’ estimates of $15.46 billion.

The addition of 2.9 million net new active accounts resulting from the acquisitions of Hyperwallet and iZettle show how those two deals are already adding value, as PayPal moves to expand internationally and away from its core market in the U.S.

Payment transactions totaled 2.9 billion for the quarter, up 28 percent, and the $164 billion in total payment volume was a 23 percent increase from the year ago period.

“In 2018 we set new benchmarks for the company for revenue, net new active accounts and engagement across our platform. We launched new products, strengthened existing relationships and entered into new strategic partnerships with some of the biggest and most influential global brands in technology, retail and finance,” said Dan Schulman, president and CEO of PayPal. “We greatly expanded our global reach, serving 267 million customer accounts, including 21 million merchant accounts. We believe 2019 will be another strong year for us, and we intend to build on our strengths to extend our leadership as the leading open digital payments platform.”

Other than the additions from the new acquisitions, the other bright spot for PayPal was the volume coming in from its Venmo business. In all, volume of Venmo transactions hit $19 billion, growing by 80 percent, in the fourth quarter. For the year, nearly $62 billion changed hands on the Venmo platform.

Mobile payments were also up for the company. Roughly $67 billion was transacted through mobile devices for the quarter, a 40 percent boost on year-ago numbers.

Despite the generally positive outcomes, PayPal’s stock was down 4.4 percent to $88.11 in after-hours trading on the Nasdaq.


Source: The Tech Crunch

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Chat app Line’s mobile payment service is getting its own Visa card

Posted by on Jan 30, 2019 in alibaba, alibaba group, alipay, Apps, Asia, China, E-Commerce, economy, Japan, King, mobile payments, money, online payments, payments, points, Tencent, visa, WeChat | 0 comments

Brown, Cony and the gang are coming to a credit card near you in Japan. Line, the messaging app company behind the cute sticker characters, announced today that it is bringing its payment service to plastic through a tie-in with Visa.

Line is Japan’s largest chat app with an estimated 50 million registered users. The cards will be released later this year and they’ll allow Line Pay, the company’s digital wallet service, to stretch beyond its existing merchant base to allow users to pay at any retailer accepting Visa . In addition, the first year of use will see customers get 3 percent of their spending back in Line’s ‘Points’ virtual currency, which is used to buy stickers and other content.

The partnership is a step up from Line’s own payment cards, which were introduced in 2016 and supported by JCB.

It’s an interesting deal because mobile is generally seen as being the future form factor for payments. In China, for example, using cash or card to pay is considered antiquated — you’ll get glares from other patrons forced to wait while you complete your transaction — but digital payments face a struggle in most other markets.

WeChat and Alipay have become de facto in China, but retailers — and particularly smaller ones — don’t always have the awareness, confidence or resources to add support for Line or other digital wallets. Japan, where cash is still king, is perhaps most emblematic of that struggle. The government is making a sustained push towards cashless — particularly ahead of the 2020 Olympics — and Line, as the country’s dominant chat app, may help that along with this partnership.

Line wrapped up a deal with WeChat last November that allows users of the China-based chat app to make payment via Line Pay points of sale. Tencent’s WeChat and Alipay from Alibaba have spent recent years developing a system that lets Chinese tourists pay while they are overseas.


Source: The Tech Crunch

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Zwipe tops up with $14M to bring biometric payment cards to market this year

Posted by on Jan 21, 2019 in biometrics, Europe, Fingerprint, Fundings & Exits, Identification, mastercard, Middle East, payments, Security, Touch ID, Zwipe | 0 comments

Biometric payment card startup Zwipe has swiped $14M to add to an earlier Series B round as it continues to work towards commercializing technology that embeds a fingerprint reader in payment plastic for an added layer of security.

“We are not commercially rolled out yet, we expect that to happen in the second half of this year, starting first in Europe and potentially in the Middle East,” a spokesman told us, saying the financing will be used to scale up the company to prepare for a commercial rollout of a biometric payment card solution in the second half of 2019.

He said it’s also eyeing additional form factors such as wearables down the line, penciling in 2020 for expanding into other devices and verticals.

Although it has yet to push its tech past the pilot stage with payment cards.

“Our technology is currently deployed in pilot programs in Italy, with Intesa Sanpaolo Bank and with 10 different banks across the Middle East,” the spokesman told us. “We have active partnerships globally. In APAC, specifically China and the Philippines, we expect to launch further trials in the near term. In Europe we have piloted with the Bank of Cyprus and expect to launch several more trials in Europe in the first half of 2019.”

Back in 2014, working with MasterCard, it showed off a credit card with an embedded fingerprint reader, seemingly taking a leaf out of Apple’s approach with Touch ID.

The new funding was raised via an offering of 6M new shares, from around 2,300 investors, ahead of a planned listing of the company on Merkur Market, Oslo Børs. Zwipe says the share offer was substantially over-subscribed, and it expects trading to commence on or around January 28. The pre-money valuation of the company is stated as NOK 189 million ($22M).

Commenting on the raise in a statement, CEO Andre Løvestam said: “Zwipe is at the forefront of a global shift towards more secure and convenient contactless payments and the market is primed for growth. We are confident that our industry leading technology and partnerships will secure a strong market position both in the short and long-term. Thanks to the new funding received, we can intensify our efforts to support our customers and partners in ‘making convenience secure’.”


Source: The Tech Crunch

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New policy puts revenue squeeze on China’s payments giants

Posted by on Jan 17, 2019 in alibaba, alibaba group, Ant Financial, Asia, Bank, Banking, Beijing, China, E-Commerce, financial services, insurance, mobile payment, online payments, payment, payments, Tencent | 0 comments

The era that saw China’s mobile payments providers making handsome interest returns on client money has officially ended.

Starting this week, non-bank payments companies must place 100 percent of their customer deposit funds under centralized, interest-free accounts as Beijing moves to rein in financial risks. In the past, third-party payments firms were allowed to hold pre-paid sums from buyers for a short period of time before transferring the money to merchants. This layout allowed companies like Alibaba’s payments affiliate Ant Financial and Tencent to earn interest by depositing customer money into bank accounts.

Exactly how much money Ant and Tencent derived from these deposits is unclear. Both companies declined to comment on the policy’s revenue implications but said they have complied with the rules and finished transferring all customer reserve funds to a centralized clearing system.

Here are some numbers to help grasp the scale of the lucrative practice. The central bank gave a two-year window for all payments firms to complete the transition as it gradually raised the reserve funds ratio, which climbed to 85 percent in November. By then, total customer funds deposited by non-bank payments companies into central custodians hit 1.24 trillion yuan ($180 billion), while another estimated 260 billion yuan was yet to come under regulated control, shows data published by the People’s Bank of China.

Collectively, the giants account for more than 90 percent of China’s third-party mobile payments and 34 percent of all third-party, internet-based payments (which include both PC and mobile transactions), according to research firm Analysys.

While the regulatory control surely has measurable revenue implication on payments firms, some experts point to another adverse consequence. “Now that payments companies are no longer putting deposits into their [partnering] banks, they lose bargaining power with these banks that charge commissions for handling their mobile payments,” an employee from a major payments firm told TechCrunch on the condition of anonymity.

Tencent doesn’t break down how much it makes from payments but the unit has grown rapidly over the past years while its major income source — video games — took a hit last year. Meanwhile Ant Financial has been diversifying its business to go beyond financial services. It has earnestly marketed itself as a “technology” company by opening its proprietary technologies to a growing list of traditional institutions like banks and insurance companies. Reuters reported earlier that technology services will make up 65 percent of Ant’s revenue in about four years, up from an estimated 34 percent in 2017.


Source: The Tech Crunch

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WeChat is quietly ranking user behavior to play catch-up with Alibaba

Posted by on Jan 15, 2019 in alibaba, alibaba group, alipay, Ant Financial, Asia, Bank, Beijing, China, credit score, Government, Messenger, mobile payments, online lending, online payments, payments, power bank, Tencent, WeChat | 0 comments

Over one billion people leave behind trails of information on WeChat every day as they use the messenger to chat, read, shop, hail rides, rent umbrellas and run many other errands. And the Tencent app has quietly started using this type of signal to determine whether a user is worthy of perks such as deposit-free renting services.

The rating system, which the company calls the “WeChat Payments Score” in Chinese, soft-launched last November across eight cities and has been piloting on a small number of apps. Among them is the Tencent-backed power bank rental service Xiaodian, which waives deposits for users if their points hit a certain benchmark. It’s easy to imagine how the rewards mechanism can help nudge customers to try out WeChat’s panoply of in-house and third-party offerings down the road.

Exactly how WeChat calculates these points is unclear, but a test done by TechCrunch shows it factors in one’s shopping and contract-fulfilling records. We’ve reached out to Tencent for more details and will update the article when more information becomes available.

Alibaba’s affiliate Ant Financial — WeChat’s biggest contender in online payments — has been running a similar assessment engine called the “Sesame Credit” since 2015. Like WeChat’s, it measures several dimensions of user data including purchase behavior and capability to fulfil contracts. People with higher scores enjoy perks like deposit waivers when staying at a hotel, incentives that could keep customers in the house. Sesame points are available through Ant’s Alipay digital wallet that recently claimed to have crossed one billion users worldwide.

The WeChat payments score is reminiscent of Tencent’s short-lived credit-rating scheme. Indeed, digital footprints can also help China’s fledgeling financial system predict creditworthiness among millions of people without financial records. That’s why Beijing enlisted tech companies including Tencent and Ant in 2015 to come up with their own “social credit” scores under state-approved pilot projects.

Over time, regulators became wary of the mounting personal information used by online lending companies and moved to assert greater control over the whole credit-rating matter. In early 2018, it changed tack to crack down on private efforts — including a Tencent-run trial. Beijing subsequently set up Baihang Credit, the only market-based personal credit agency approved by China’s central bank. The government holds a 36 percent stake in Baihang. Ant, Tencnet and several other private firms also got to be part of the initiative, though they play complementary roles and hold 8 percent shares each.

While most countries use credit rating mainly as a financial credibility indicator, China has taken things a few steps further. By 2020, China aims to enrol everyone in a national database that incorporates not only financial but also social and moral history, a program that has raised concerns about privacy and surveillance.


Source: The Tech Crunch

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A month after $70M, Clearbanc raises $50M fund to front startups ad money

Posted by on Dec 18, 2018 in Advertising Tech, Apps, Clearbanc, Dragon's Den, eCommerce, funding, Fundings & Exits, payments, Recent Funding, Startups, TC, Venture Capital | 0 comments

Clearbanc is disrupting startup funding by providing companies cash to buy ads in exchange for a revenue share so they don’t have to sell as much equity to venue capitalists. That idea has proven so appealing that 1000 companies seeking up to $1 billion total hit up Clearbanc since we reported it raised $70 million last month. So to meet the demand of the most eligible startups asking for marketing cash, Clearbanc has just raised a $50 million fund from Seamless co-founder Jason Finger’s new firm Upper90.

If a company’s Facebook ads and Stripe sales metrics show it’s a sure bet, Clearbanc can provide $5,000 to $10 million in funding to pour fuel on the fire. Startups invest that into ad spend, and then split the revenue with Clearbanc from the sales triggered by those ads until it’s paid back plus six percent. Essentially, Clearbanc offers an alternative to selling valuable equity and control to VCs by offering capital based on new data sources traditional banks aren’t looking at.

“In 2018, Clearbanc has funded over $100M into 500 different companies. Our portfolio companies are putting that capital to work and growing at over 100% year over year on average” co-founder and CEO Andrew D’Souza tells us.

Clearbanc co-founder Michele Romanow

To back the investments, Clearbanc raises sub-funds from LPs who earn a return through a slice of the revenue sharing deals. Part of the last $70 million was used to set up the first Clearbanc fund, and the whole $50 million being announced today is the second fund. Clearbanc expects the funds to mature and pay out after just two years, offering LPs a faster but lower-stakes return then typical eight-year VC funds. Upper90’s goal is just those sort of steady gains. “This deal literally came together in 3 weeks from first meeting to close, which was unheard of” D’Souza notes.

He wouldn’t say exactly how much Clearbanc has raised in traditional equity for itself, but revealed most of the $70 million round’s investors were buying standard equity and it has some flexibility in how it applies some of the funding. D’Souza tells me “We have been largely focused on ecommerce companies and subscription ecommerce, but have started doing some deals with enterprise companies.  In 2019 we plan to expand internationally beyond the US and Canada, introduce new verticals, and launch new financial products to help entrepreneurs.”

Previously at McKinsey, D’Souza had raised over $300 million in venture for startups before teaming up on angel investments with Michele Romanow, an investor from Canada’s Shark Tank-style TV show Dragons’ Den. The two have become a romantic couple amidst Clearbanc’s start in 2015. It’s now taken cash from Emergence Capital, Social, Social Capital, CoVenture, Founders Fund, 8VC and others. Groupon co-founder Ranjen Ruparell and Third Point hedge fund partner Keri Findley are now joining Clearbanc’s board. “We may take on more traditional equity in the future but we don’t need it right now” D’Souza reveals. “We will raise an additional 250-300M in LP capital next year to continue to meet demand.”

We are witnessing an evolution of the growth capital business – entrepreneurs do not want to be forced to choose between restrictive equity or debt arrangements to fund their business growth” Cleabanc’s new board member Findley says. “Clearbanc is building a new asset class that is compelling for entrepreneurs as well as investors looking for strong risk-adjusted returns.”

The business model depends on Clearbanc accurately assessing demand for the products for which it’s funding ad buys. If products flop and the startups don’t have much revenue to share, its influx of LPs will dry up. Clearbanc is also vulnerable to changes in the ad market and platforms like Facebook or Google. If ad prices go up or new content formats like Instagram Stories don’t work as well for direct response ecommerce ads, that could also put the squeeze on Clearbanc. “We’re funding customer acquisition across platforms (it just happens to be primarily on Facebook and Google right now)” D’Souza counters. “We’re looking at data across our portfolio and building relationships with emerging platforms to help our companies stay ahead of the curve”

Given the explosion of direct to consumer brands in the wake of successes like Dollar Shave Club’s acquisition for $1 billion, there may be plenty of startups clamoring for Clearbanc’s capital.


Source: The Tech Crunch

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