Posts tagged 'Paypal'

Float management isn’t easy

Banks are being bamboozled by the idea that the solution to most of their problems lies in becoming more like the fintech upstarts currently threatening their turf.

This is strange because if anyone should know the degree to which fintech’s cost advantage is linked to unadulterated regulatory arbitrage, the exploitation of banks’ own subsidy systems against them, cartel-based solutions or complete disregard for par value protection of the payment float, it should be banks.

There are many facets to this story. In this post, however, we’re going to explore how and why fintech — in its rush to disrupt finance — has overlooked the critical role banks play in protecting the par value of the monetary float (usually with collateral), and why it’s not that easy or even advisable to provide payment services without the support of such a scheme. Read more

Dreams and growth; risky, also interesting

Via Chinese research shop Red Pulse on Tuesday:

Ant Financial announced the beta version of an online private equity trading platform, Antsdaq, on November 23. Antsdaq supports four different types of products, aiming at fundraising between RMB2m and RMB10m. Trial fundraising will start on November 30, through to the end of December. However, investors need to prove net assets above RMB1m in order to be qualified; this can be illustrated by balances on Yu E Bao and other investment tools from Ant Financial, or tied to a credit card with an RMB50,000 limit.

For those who don’t know, Ant Financial is Alibaba’s financial services affiliate which (among other things) manages Alipay’s Yu E Bao money market product offerings. Alipay is Alibaba’s answer to PayPal, albeit a much more shadow banking-esque incarnation of the latter. Read more

Is it a bank, a money transmitter, or a Silicon Valley shadow financier? No, it’s just Paypal!

In the US, what determines whether a payments company qualifies for money transmitter status (rather than bank or investment manager status) is how it treats customer funds.

Generally speaking, to qualify for money transmitter status, customer funds must be transmitted to a specified person/place or to licensed depository institutions to be held “for the benefit” of customers (FBO).* The creditor relationship is not supposed to be between the customer and the money transmitter — because they’re not supposed to be deposit takers — but between the customer and the entity which banks the money transmitter. That’s the transmission.

But this arrangement, quite obviously, isn’t as profitable as being able to do what you want with the money put in your care. While money transmitters are still able to benefit from the interest earned on these FBO accounts, this is a paltry sum compared to what could be achieved if they were managing the money on a discretionary basis. Read more

Turning mobile money into M0

In our previous post we explained why Jean-François Groff, CEO of Mobino, believes mobile payments systems could be a lot more honest and more money-like.

How does Groff’s company fit into it all? Well, his big idea really is to keep M0 (as economists like to call base money) exactly what it is, M0. Read more

Why central banks should take charge of their digital currencies

The mobile money/virtual currency arena is getting more and more crowded. And the question remains: will the concept ever gain the critical mass needed to become the next big thing in finance?

From Bitcoin to M-pesa, Square, Paypal, Dwolla and Ven (to name just a few) … the number of new concepts is piling up. Read more

More on M-pesa and e-money

We wrote about Kenya’s M-pesa mobile money model on Wednesday, which we think is a really innovative and encouraging development in the world of money supply.

The point we were trying to make at the time is that there are some interesting parallels between Safaricom’s role in the M-pesa e-money market and the role of central banks in conventional money markets. Read more

LinkedIn IPO ‘mispriced’, investor

A prominent Facebook investor and co-founder of PayPal, the online payment system, has accused Wall Street of undervaluing the recent IPO of networking site LinkedIn, contributing to the doubling of its shares on opening day, reports the FT. Peter Thiel, an early Facebook investor and PayPal co-founder, said banks did not understand the full potential of the latest internet companies and warned that the next wave of Silicon Valley stars would negotiate hard as they prepare to go public. LinkedIn was priced at $45 a share by Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase, raising $352m. DealBook meanwhile notes that money manager BlackRock has weighed into the debate, accusing banks of overpricing IPOs to gain more fees.