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4 part series on Lightning Network Part 2: Eeyore says nice theory, shame about the traction

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Eeyore usually gets negative audience reaction at the Pooh Corner Tech Debates as his pessimistic worldview contrasts with the optimistic enthusiasm of most tech conference attendees. He started by – uncharacteristically –  pandering to his audience by telling people that Lightning Network was a centralised solution; this got a heckle “why does that bother a legacy finance guy like you?”

After that weak start Eeyore went on to ask who is actually using Lightning Network today and to point out two major weaknesses:

  • weak economic incentives to operate a node. Even enthusiastic early adopters need economic incentives. Lightning Network only works if people operate nodes that provide sufficient liquidity to ensure that payment transactions are done.  The incentive is routing fees. You can read the details here but the bottom line is a return of about 1% per year, which too close to ultra low risk/simple US Treasury Bonds.
  • Other consensus mechanisms do not have the same Bitcoin Proof Of Work on-chain settlement flaws. Alternatives include Proof Of Stake on Ethereum and various forms of Directed Acyclic Graph .

Eeyore ended his talk by pointing out that during the last Bitcoin bear market in 2019, you could have seen Lightning Network as cool science project, but two years later after another big bull market, we are no closer to mainstream adoption.

Enough glass half empty pessimism. Next week Tigger gives a more bullish view in “be patient it is happening and will change everything”

Some subjects are too complex for our short attention spans, so we do 4 posts one week apart (see here for 1,3, 4 some may not be published yet), each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.

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Source: https://dailyfintech.com/2021/07/13/4-part-series-on-lightning-network-part-2-eeyore-says-nice-theory-shame-about-the-traction/

Crowdfunding

UK’s Embedded Finance Fintech Railsbank Now a Visa Ready Banking Identification Number Sponsor

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Railsbank, an established global embedded finance solution provider, and Visa (NYSE: V) are joining forces to promote local Fintech services, with Railsbank becoming a Visa Ready Banking Identification Number (BIN) sponsor.

Through the BIN sponsor program, all of Railsbank‘s customers will be able to access the same international payment tech, expertise and revenue-generating opportunities as they could had they been working as a direct card issuer with Visa.

This program enables Railsbank to further expand its existing market portfolios while serving as a  key partner for Fintech companies as they introduce their card program across the country. Teaming up with Railsbank also offers Fintech firms the services and industry know-how they require to get up and running with great efficiency.

Railsbank is also a Visa Fintech Fast Track partner, allowing Fintechs to easily gain access to Visa’s global network. The initiative is part of the payment giant’s international strategy to open up its network and support key players that are creating innovative commerce solutions.

Nigel Verdon, CEO and Co-founder, Railsbank, remarked:

“Our partnership with Visa gives us the opportunity to provide companies with a broad range of Visa payment solutions, such as Cards-as-a-Service, that meet the identified needs of their users. Railsbank simplifies the process of embedding financial services into a customer journey and can therefore help any company – no matter what industry or sector they’re in – to become a fintech by adapting to the needs of their market and customers quickly and easily.”

Kunal Chatterjee, Visa Country Manager for Singapore and Brunei stated:

“At Visa, we are focused on engaging and building strategic partnerships with the Fintech community. We’re extremely pleased to have Railsbank join us as an exclusive issuer in Singapore, and Banking Identification Number (BIN) sponsor. Our collaboration with Railsbank and the BIN sponsorship arrangement is beneficial for Fintechs as it accelerates the onboarding journey with Visa. We are looking forward to seeing more Fintechs benefit from this partnership with Railsbank as we continue to drive innovation and support the launch of products and solutions that transform the payment experiences of consumers in Singapore.”

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Source: https://www.crowdfundinsider.com/2021/07/178127-uks-embedded-finance-fintech-railsbank-now-a-visa-ready-banking-identification-number-sponsor/

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Payments

Stablecoin News for the week ending Wednesday 21st July.

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Oh just FUD it for a while and see what happens!

Here is our pick of the 3 most important Stablecoin news stories during the week.

This week saw the slow, cautious progress by Central Banks combined with a continued program by their supporters to stop or slow the growth of the existing privately issued stablecoin and Crypto ecosystem.  

First the European Central Bank announced it has started the next phase in introducing its own central bank digital currency (CBDC) – the “digital euro“ which it has pushed back until 2026.  

A two-year investigation period will first involve discussions of policy objectives and use cases for the remainder of the year, followed by tradeoffs between privacy and other policy objectives such as anti-money laundering in early 2022.

After that, the impact on the financial system, particularly the drain on bank deposits and how to manage this, as well as the use of cash, are on the agenda. Another important element of the investigation will be the business models of private and public entities involved with the digital euro.

After the investigation phase, and a decision to continue in 2023, the actual development is scheduled to take around three years, which means the ECB has quietly added another year to the development phase, compared to its statements a few months ago.

https://think.ing.com/articles/ecb-presses-ahead-with-digital-euro-focusing-on-use-cases-first/

Here comes der FUD (Fear Uncertainty and Doubt), it seems to be falling into three categories, environmental (will not survive scrutiny as current system is also expensive), risky (will not survive because people are not betting all their wealth on Crypto) and evil (will not survive because normal people are using it for legitimate things and it is never popular to call normal people evil).

Here is the risky FUD, in a heavily debunked paper, the claim is that if left unchecked, the world of stablecoins could evolve into one reminiscent of the 19th century’s free banking period in the U.S., according to two prominent financial experts.

Yale economist Gary Gorton and U.S. Federal Reserve attorney Jeffery Zhang said there existed systemic risk to the financial system by a “digital form of privately produced money” pegged one-to-one with “safe” assets.

In an academic paper titled “Taming Wildcat Stablecoins” released Saturday, the pair describe similarities they see in stablecoins with that of privately issued “wildcat” bank money in the past.  Basically, they argue that if it is not made by a Government, it is not safe.

Stablecoins Risky Like ‘Wildcat’ Bank Practices of 19th Century, Gorton and Zhang Write – CoinDesk

But are stablecoins and CBDC’s really an innovation or are they just a copy of the past version of money?  Henry Ford was famous for saying if he listened to his customers he would have just built a faster horse! 

Bitcoin’s popularity has unleashed a race for digital money dominance, which is likely to intensify with the emergence of Central Bank Digital Currencies (CBDCs). In a 2021 survey of central banks, 86% of respondents indicated they are actively researching the potential for CBDCs. The question that emerges is how will CBDCs live alongside borderless cryptocurrencies like bitcoin?

This paper is a three-part study on CBDCs within the context of the evolution of money. Readers will find that CBDCs will play an important role in the normalization of money as a digital concept. The paper outlines several factors that will contribute to the rise of CBDCs in the coming years, as well as the design limitations of CBDCs that will drive demand back to bitcoin.

Rise Fall Central Bank Digital Currency – Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides

So in summary, Central Banks are having a lot of trouble with design choices and hence are moving forward very slowly, while their supporters are trying at the very least to slow the rapid growth of the current stablecoin and Crypto ecosystem, but regardless, we are left with an interesting question.  Does merely transforming current money into a Digital form make a compelling innovation or will it dwindle next to the more interesting stuff happening in Crypto land?

___________________________________________________________________________________________________________

Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.  

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives. 

___________________________________________________________________________________________________________

New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

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Source: https://dailyfintech.com/2021/07/21/stablecoin-news-for-the-week-ending-wednesday-21st-july/

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Crowdfunding

UK Fintech Modulr Secures Visa Ready Certification, which Helps Clients Access Seamless Digital Payments Solutions

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UK-based Fintech firm Modulr reveals that they’ve managed to secure their Visa Ready certification, which supports customers in selecting the “best of breed payment solutions” that meet Visa’s international standards.

As noted in an update from Modulr, the extended collaboration with Visa will help with building on their principal issuing membership. Modulr added that they are helping companies with automating payment flows, embed payments within their proposition and introduce completely new features and services.

The Modulr team further notes that as lockdown restrictions begin to ease, it is important that SMEs recover quickly and start benefitting from the fast-evolving digital economy. Research shared by Modulr reveals that SMEs are facing pressure when it comes to “curbing the rising cost of payment services on the one hand and meeting rising customer expectation of payment experiences on the other.”

As stated in a release from Modulr, achieving Visa Ready status “certifies the Modulr infrastructure means we can give customers peace of mind they’re using the highest technological standard of Visa payment solutions.”

Jill Docherty, Head of Business Development, UK&I at Visa, stated:

“We’re delighted to be part of Modulr’s continued growth and proud they have achieved Visa Ready certification. Small businesses continue to be some of the hardest hit by the pandemic and together with Modulr, we’re committed to supporting them as they build for recovery. Through this extended partnership more businesses will be able to access the crucial tools and resources they need to benefit from the digital economy.”

Myles Stephenson, Chief Executive at Modulr remarked:

“Securing Visa Ready certification is a critical step in achieving our goal of striving for greater innovation and payment improvements across the industry for every size of business. Working with Visa, our mission is to further expand our platform in the coming months so every UK and EU business can easily and efficiently benefit from the power of embedded payments.”

In another update, Modulr notes that Bottlepay is on a mission to fundamentally reshape or transform the way businesses and consumers transact across the globe. Bottlepay aims to redefine the payments landscape via seamless social integrations and “lightning-fast” transactions. Built on the Bitcoin network, the Bottlepay platform “aims to give everyone access to an open payment system which allows users to send, spend and receive money anywhere in the world, in real-time, in both conventional and digital currency.”

As mentioned in a blog post by Modulr, Bottlepay’s vision for the future “is precisely the sort of innovation that Open Banking is designed to facilitate.” Modulr also noted that “a directive which came into force in 2018, Open Banking powers new ways for users to access a wide range of financial services and offerings from fintech innovators.”

Modulr further revealed:

“In making its vision a reality, Bottlepay needed an Open Banking-enabled payments provider that was not only switched on, but also switched in – one that could bridge the paywalls and connect it to the Open Banking ecosystem and fiat payment rails, while simultaneously providing a platform that would support its innovation both now, and in the future.”

They added:

“If Open Banking has given Bottlepay the framework for collaboration, then Modulr is delivering the pure payments power; eradicating the barriers to effective instant payments by providing not only access to Open Banking innovations like payment initiation, but also the underlying account infrastructure that enables their full potential to be realized.”

(Note: to learn more about this update, check here.)

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Source: https://www.crowdfundinsider.com/2021/07/178064-uk-fintech-modulr-secures-visa-ready-certification-which-helps-clients-access-seamless-digital-payments-solutions/

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Fintech

Thunes Acquires Paris-Based Limonetik to Expand Its Cross-Border Payments Platform

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Cross-border payments firm Thunes has announced the acquisition of its European counterpart Limonetik which is one of the earliest developers of an alternative payment methods platform suitable for international merchants and marketplaces.

Similar to Thunes, the firm closely partners with payment service providers and financial institutions.

This move will complement Thunes’ existing cross-border payments solutions by enabling businesses to get paid in 70 countries, using over 285 local payment methods such as mobile wallets, payment by instalments (BNPL), QR code payments and more. The solution will be known as Thunes Collections.

Founded in Paris in 2008, Limonetik’s platform has over 14,000 merchants, marketplaces and fintech players and has processed more than EUR 2 billion a year.

Thunes is also unveiling a new brand identity, including a new logo and website to better reflect its market position and expanding service offerings.

In May 2021, Thunes announced a US$60 million Series B growth round led by global private equity and venture capital firm Insight Partners, bringing the company’s total funding to US$130 million in less than two years.

The funding enabled Thunes to speed up investment in its operations, product and technology.

Peter De Caluwe, CEO of Thunes.

Peter De Caluwe

“Thunes is recognised for our far-reaching global network and brilliantly simple payments solution. We are excited to further strengthen our offering with a global collections capability made possible through the acquisition of Limonetik.

We welcome the Limonetik team to Thunes, and as one, we look forward to offering a single end-to-end payment solution that connects every corner of the world and makes the global economy accessible to all.”

said Peter De Caluwe, CEO of Thunes.

Christophe Bourbier, founder of Limonetik

Christophe Bourbier

“Limonetik has been driving the transformation of collections with its platform as-a-service (PaaS) model, while Thunes possesses a powerful global payments network.

We are incredibly excited to extend our combined payments and collections solutions across the world,”

said Christophe Bourbier, Founder of Limonetik.

Featured image credit: edited from Unsplash

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Source: https://fintechnews.sg/53528/payments/thunes-acquires-paris-based-limonetik-to-expand-its-cross-border-payments-platform/

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