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PayPal Tries Crypto, LatAm Shakeout, UK Boosting FinTech (Future of Finance | Week in Review)

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation. 
future of finance

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation. 

What’s PayPal Want With Crypto?

What happened: “PayPal PYPL became the first major U.S. fintech company to offer its own crypto token with a dollar-pegged stablecoin known as PayPal USD, making big promises of how it can move money between millions of crypto investors.”  

Why it matters: The ability to quickly settle transactions, especially those across borders, has long been one of the main draws of stablecoins. It’d be a natural extension for a payments processing company like PayPal, especially since a lot of the risks involve regulations the behemoth has already satisfied. If anyone can make a two-sided marketplace work overnight, it’s a legacy company with 435 million accounts already open.

What’s next: Possibly a quicker way to move money anywhere you want, provided you’re already on the platform. (By MacKenzie Sigalos, CNBC)

Latin America’s Fintech Shakeout

What happened: The boom is over. Now comes survival of the fittest. “A report to be published by data provider Distrito later this month shows the number of fintechs being launched has plummeted in Latin America to just a half-dozen this year — down from a peak of 290 in 2018.”

Why it matters: No region in the world experienced the gold rush of fintech investor money that moved into Latin America over the past half decade. Growth for growth’s sake has been replaced by a desire for profit, which is driving up interest rates on indebted consumers to unheard of levels, drawing the sorts of political attention that could threaten the entire marketplace.

What’s next: Less available funding means more spoils go to the well-resourced giants. Expect companies like Nubank NU to continue to gobble up customers. (By Carolina Millan, Bloomberg)

The Chinese Firms That Suddenly Can’t Pay Their Bills

What happened: A top property developer and a secretive conglomerate both announced versions of the same thing this past weekend: they didn’t have money to pay out promised returns to investors.

Why it matters: In China, property developers and financial firms are almost one in the same. The fact that one can’t pay bondholders and the other “looks suspiciously like a Ponzi scheme” will probably only worsen the country’s current liquidity crisis, where a nation of nervous savers refuses to spend, resulting in worsening deflation.

What’s next: The word “contagion”. You’ll be hearing it a lot. (By Diego Mendoza, Semafor)

It’s More Fun to Be the Lender Than the Owner

What happened: “Private credit funds are starting to confront the downside of the easy-money era of the past decade: They’re increasingly taking control of businesses that fall foul of loan agreements.”

Why it matters: Lenders want to get paid what they’re owed. They don’t necessarily want to own new businesses. There are paths to profitability involving debt-for-equity swaps, but in the short term there could be an increase in restructurings (read: layoffs) that make shaky European economies even shakier.

What’s next: Whatever it is, we won’t know much about it. That’s at least one advantage of private credit: privacy. (By Silas Brown, Bloomberg)

Can the U.K. Compete With Government Money?

What happened: The U.K.has created the Fintech Growth Fund FGF , a $1 billion vehicle to help growth-stage companies compete and ultimately list within the country in what it says is an attempt to compete with Silicon Valley but really might be an attempt to compete with the Nasdaq.

Why it matters: The U.K. has come under scrutiny by domestic fintech start-ups for its unhelpful regulatory and listing environment, leading to a commission that recommended helpful steps the country could take. This led to the rare industry-specific fund and some overhauls at the London Stock Exchange. If those reforms allow the country to keep local talent local, it could have a positive effect on a financial community that’s been hit hard by Brexit and other forms of uncertainty.

What’s next: A collective holding of breath by the industry and those who benefit from it. (By Ryan Browne, CNBC)

Of course, I couldn’t envision the extent to which AI would take off when I initially urged you to buy Nvidia.