Play Now, Pay Later
By Alex Johnson
3 Fintech News Stories
#1: Flexible Benefits
Ben, an employee benefits platform, raised a $16 million Series A round:
Cherry Ventures, DN Capital and Seedcamp joined the round for Ben, an agnostic platform that lets employees to choose from a wide array of workplace benefits options and find what suits them.
The firm says that its technology cuts out cumbersome admin for HR managers integrating accounting, HR, and payroll systems to streamline all onboarding, enrolment, management and offboarding processes.
The per-employee Ben Mastercard and flexible allowance function lets companies set budgets and spending rules to put decision-making in the hands of the employee to choose what suits them.
A lot of the attention in the benefits space these days is on the creation of benefits platforms for independent workers – and justifiably so! That’s a big gap that needs to be filled – but Ben is a good reminder of how much better we can make benefits work for full-time employees as well.
In this specific case, Ben would appear to be solving two problems. 1.) For employers, Ben removes a lot of the administrative hassle of managing benefits programs by creating a self-service portal for employees. 2.) For employees, Ben provides a great deal more flexibility to pick the benefits that work best for them rather than being shoehorned into a one-size-fits-all package.
#2: Play Now, Pay Later
A new BNPL provider just raised a $6 million seed round from a16z:
Blockchain-based games have seen a surge in popularity, but playing them is getting expensive. Play-to-earn games like StepN require players to purchase an NFT before they can participate, while other crypto video games offer users pricey upgrades such as virtual avatars and distinctive skins or costumes.
Halliday, a startup founded last November by Akshay Malhotra and Griffin Dunaif, is building a “buy now, pay later”-style financing product targeting gamers who want to pay off in-game purchases over time.
As is the case with many traditional BNPL providers such as Klarna and AfterPay, Halliday’s product will be interest-free for users, CEO Malhotra, who previously worked in the hedge fund space, said.
Unlike with traditional BNPL providers, though, Halliday won’t charge penalty fees to users who default on their payments, Malhotra explained.
BNPL for play-to-earn games.
Give me a second to smash my head against my desk a few times …
Ok. Let’s take a look.
Halliday isn’t planning to charge interest or penalty fees on its loans, which is good, but it prompts the question – how are they going to make money?
Halliday plans to charge an initial fee to customers using the product to cover the startup’s costs, Malhotra hopes to eliminate the fee over time as his goal is to keep the product as low-cost as possible for gamers. The founders did not share any further detail on their monetization plans, noting that they are still focused solely on building the product itself.
So it’s an interest-free, fee-free BNPL loan product that will be charging fees for the foreseeable future in order to cover the company’s costs? Sure.
What about risk management? Halliday is planning to mitigate its downside risk by repossessing the NFTs that its customers buy with its loans if they don’t pay the loans back, but how is Halliday going to model out the value of the NFTs and risk of them depreciating (which isn’t unheard of in the NFT space)?
One major consideration for Halliday will be how to model risk associated with its loans since the company will be paying game developers upfront for digital assets on behalf of its users.
“There are not that many comparables for how to model risk for something like this, so this is where our team has been working to try to come up with innovative new approaches,” Malhotra said.
So they don’t know, but they’re going to try and come up with something innovative. OK.
Even if the company had great answers to these questions, I still don’t think a16z should be funding it. Nothing against the company or its founders, who I’m sure are lovely people, but we have much bigger problems to solve (like affordable housing).
#3: An Ambitious Idea
A new platform, focused on KYC and data storage and security, raised a seed round:
Anyone who has ever applied for an apartment or a mortgage knows that these companies tend to collect much more information than they need to determine if you can afford the monthly payment. The application process often involves pages of data about you and your life, but what if companies could grab in a secure way just the data they need?
That’s the premise behind Footprint, an early-stage startup that wants to transform the way companies collect information, while helping consumers control their own data. It’s an ambitious idea, and the startup announced a $6 million seed investment today.
“For end consumers, Footprint is the last identity form that they’ll ever fill out. For enterprises, Footprint is just five lines of code. And it gives our customers the ability to both onboard users and do account creation or ‘Know Your Customer’ (KYC) and offload the cost and risk of all of the security that has to happen around storing that data,” company co-founder and CEO Eli Wachs told TechCrunch.
Most large banks and fintech companies tend to have two different departments for KYC/fraud management and information security. Those departments each tend to buy their own software, which is why we end up with vendors focused on KYC/fraud (Persona) and information security (VGS).
Footprint is building a single solution for both groups, while also trying to bring the end customer in as a stakeholder (enter your PII into Footprint once and then use it wherever Footprint is available). TechCrunch is right, that is ambitious.
Also, the TechCrunch article references another company that might end up being Footprint’s most threatening competitor:
The company’s goal is to create a tool that’s not unlike Apple Wallet, but for your data, so it would hold your private information in an encrypted format using a mobile device to ensure identity. “Footprint securely holds consumer verifiable credentials (such as Social Security number, date of birth, email, phone number) in a protected “secure enclave”, backed by hardware-level cryptographic attestation,” the founders explained.
The company then takes advantage of Face ID or Touch ID on your phone for proof of identity to access and share that information with trusted partners.
2 Fintech Content Recommendations
#1: Here’s what it might look like if Apple built banking (by Itai Damti, Unit) 📚
A couple of weeks ago, I wrote about what an Apple bank account might look like.
The good folks at Unit also took a whack at this question and their answer is absolutely worth a read.
Two specific points that Itai focuses on, which I didn’t get into deeply in my article, are Apple’s ability to deliver personalized financial advice (based on all the consumer data they have) and Apple’s ability to keep more payments transactions inside its walls (cutting out the card networks).
#2: Back to the trend line? (by Benedict Evans) 📚
I’ve been wondering what the future of ecommerce might look like, relative to in-store commerce, and this piece by Benedict Evans provides some extremely useful insights.
Here’s the core one – in the future, it is likely that all sales will originate online and it will be the distribution logistics on the back end that will vary (mail, store pickup, bike delivery, etc.)
1 Question to Ponder
What are some examples of fintech companies swapping out debt (loaning money in exchange for the principal + interest and/or fees) with equity (acquiring partial ownership in an asset)?
Income sharing agreements (ISAs) are one. What are some others?