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Hey Fintech Fam!
The non-fungible token (NFT) craze is driving a convergence of with Big Tech. In this week’s newsletter, technology correspondent Cristina Criddle explores how social media companies like Meta and Twitter are using their platforms to elevate the once niche digital asset.
Plus, I talk to the co-founder of one of the largest players in Egypt about his company’s plans to accelerate digital payments among unbanked communities in Northern Africa.
You can build it, but will they come?
Social media companies like Twitter, Facebook and Reddit are creating new features that integrate NFTs into their platforms in a bet that the digital tokens will become mainstream.
However, it’s yet to be seen whether the new features will be widely adopted; NFT trading remains a niche market. A November study of 6.1mn NFT trades found that the top 10 per cent of traders perform 85 per cent of all transactions.
Last month Twitter rolled out a new feature that allows NFT owners to set themselves apart with a new hexagon-shaped profile image to display their digital art. The move is part of Twitter’s push to find new ways to monetise the site through its premium Twitter Blue subscription, which costs users $2.99 a month for the otherwise free site.
Though some users were enthusiastic about the news, many more mocked the new feature. The most popular reply (by more than 8,000 likes) under the announcement was a Drake meme highlighting that the platform had prioritised a feature that was “not asked for” over tools that users have long requested.
But the pushback has not stopped technology companies from investing in infrastructure for the digital assets.
Reddit said in a statement to Techcrunch that it had been testing a similar feature internally. YouTube and Meta are also exploring NFT features.
YouTube CEO Susan Wojcicki wrote in a blog on the company’s priorities for 2022: “We’re always focused on expanding the YouTube ecosystem to help creators capitalise on emerging technologies, including things like NFTs, while continuing to strengthen and enhance the experiences creators and fans have on YouTube.”
As Big Tech companies vie to build the best systems to support NFTs, a major obstacle still remains: very few people own NFTs. A report by analytics firm Finder.com estimated that just 2.8 per cent of American internet users owned one last year, and only 3.9 per cent said they planned to buy one.
People also need to own cryptocurrencies in order to get into the market. Besides the environmental concerns attached to investing in cryptocurrencies, which are used to buy and sell NFTs, buying digital art has high transaction fees. The so-called “gas fees” help prove the tokens are authentic but the extra cost is a hard sell for retail investors who have come to expect fee-free trading.
All of this makes NFTs difficult to understand and difficult to invest in as a casual or first-time buyer. While crypto wallets are aiming to become more accessible, and certain cryptocurrencies have lower gas fees — it could be a while before hexagon profile pictures on Twitter become the norm. (Cristina Criddle)
Quick Fire Q&A
Every week we ask the founders of fast-growing fintechs to introduce themselves and explain what makes them stand out in a crowded industry. Our conversation, lightly edited, appears below.
Last week I spoke with Mounir Nakhla, chief executive and co-founder of MNT-Halan, a payments company in Egypt with an unlikely origin story. MNT-Halan started off in 2017 as a ride-hailing app that catered to cash-reliant rural areas of Egypt. However, when the car-sharing service failed to turn a profit, Nakhla pivoted to the part of the business that was actually making money: financing. Since relaunching as a in 2019, Halan has raised more than $100mn in funding, attracted thousands of merchants on to its platform and continues to add roughly 50 merchants a day.
How did you get started? We entered areas that were completely underserved and where people were completely unbanked. We started by offering working capital for merchants to grow their businesses and extra credit for customers to increase their consumption. What we’re trying to provide is integrated services in lending, working capital and consumption, then payments, P2P transfers, bill payments, mobile top-ups and ecommerce.
What lessons from the ride hailing industry were helpful for pivoting to? The big lessons were that underbanked people have smartphones, they know how to use them and they can learn how to do new things on them very quickly. If you have people who have smartphones . . . you can easily sell them other stuff on the smartphones and on through the app.
Consumer is a more crowded market than ride–hailing. What made you think you’d be more successful in this industry? [Digital wallets and “buy now, pay later”] could be a well-established concept internationally, but in Egypt we are the first independent wallet that is not a telecom operator and not a bank. Plus, we are the first interoperable wallet, meaning you can transfer money to any telecom wallet but those wallets cannot transfer to one another. Our thesis for the underserved communities that are underbanked is that the hook is actually the lending. Without the lending there is no cash.
Are you planning to expand outside of Egypt? Yes, we are exploring a number of countries in Africa and in Asia.
What’s the revenue model? Mostly interest income and merchant rebates and a small amount from interchange but that’s growing very fast.
Who are the major shareholders? Apis Growth Fund II, Development Partners International (DPI), Lorax Capital Partners and GB Capital.
What products do you want to offer next? What we’re planning to do is disrupt other industries. For example, today we have more than 50,000 [small business] kiosks that work with us. So we want to put on the app a way that they can start ordering that Coca-Cola, or Pepsi or crackers, and then we can start disrupting this whole industry, cutting out the middleman.
Payments stumble PayPal shares lost nearly a quarter of their value last week after the international payments company reined in its growth outlook as inflation and supply chain issues dented spending among lower-income customers. The guidance also weighed on other payment companies’ stock prices including Cash App-parent Block. PayPal also disclosed that its user base had shrunk after the company excluded 4.5m fake accounts that had been fraudulently created by bots to receive referral bonuses.
Regulating virtual reality Regulators, already busy trying to keep pace with digital asset markets, are also paying closer attention to the metaverse, which is seen as the next frontier for payments and ecommerce. UK authorities issued a warning to technology companies that the new virtual worlds they are creating will be subject to the same stringent regulations as the rest of the digital world, potentially opening them up to billions of pounds in potential fines.
Billion dollar boredom NFT pioneer Yuga Labs, the start-up behind the Bored Ape Yacht Club collection, is in talks with Andreessen Horowitz for a financing deal that would give the company a $4bn-5bn valuation. The investment by the leading Silicon Valley investor group — which was an early backer of Facebook, Twitter, Airbnb and Stripe — will probably add even more hype to the frothy but lucrative market for crypto art.
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