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Personal Capital sells to Empower Retirement in deal worth up to $1B

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Today Personal Capital, a fintech company that had attracted more than $265 million in private funding, announced that it is selling itself to Empower Retirement, a company that provides retirement services to other companies. The deal is worth $825 million upon closing, with another $175 million in what are described as “planned growth” incentives, according to a release.

The deal is a likely win for Personal Capital . According to Forbes, the firm was worth $660 million around the time of its Series F round of funds, which it raised in February of 2019. The company was valued at around $500 million in December of 2016, meaning that investors who put capital in at that point, or before, likely did well on their investment.

Venture groups who put capital in later, unless they had ratchets in place, likely didn’t make as much from the deal as they originally hoped. Regardless, a $1 billion all-inclusive exit is nothing to scoff at; Facebook once bought Instagram for that much money, and the sheer cheek of the transaction at the time nearly broke the internet.

During its life as a private company, Crosslink Capital, IGM Financial, Venrock, IVP and Corsair each led rounds into the company according to Crunchbase data.

Personal Capital is a consumer service that helps folks plan for retirement, and invest their capital. The company offers free financial tools, and a higher-cost wealth management option for accounts of at least $100,000. The company doesn’t like being called a robo-advisor, instead claiming to exist in the space between old-fashioned in-person wealth management relationships and fully automated options.

Regardless, the company’s sale price should help market rivals price themselves. Here are Personal Capital’s core stats (data via Personal Capital, accurate as a May 31, 2020):

  • AUM: $12.3 billion
  • Users: 2.5 million

So, Wealthfront and M1 Finance and others, there are some metrics for you to weigh yourselves against. Of course, other, competing companies have different monetization methods, so the comparison won’t be 100% direct.

The Personal Capital exit fits into the theme that TechCrunch has tracked lately, in which savings and investing applications have seen demand surge for their wares. This is a trend not merely in the United States where Personal Capital is based, but also abroad.

Aside from Personal Capital’s exit today, we’ve also seen huge deals in 2020 from Plaid, which sold to Visa for over $5 billion, Galileo’s exit for over $1 billion and Credit Karma’s sale for north of $7 billion. In response to this particular news item, TechCrunch’s Danny Crichton noted that fintech is “probably the hottest exit market right now.” He’s right.

Source: https://techcrunch.com/2020/06/29/personal-capital-sells-to-empower-retirement-in-deal-worth-up-to-1b/

Crowdfunding

Fintech Company Nth Round A Viable Option for Startups and SMEs During Covid-19

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Nth Round, founded in 2018 and based in Philadelphia, is a “comprehensive equity management platform for companies of all stages and sizes” and can enable startups and SMEs to “manage equity, engage shareholders, and facilitate liquidity in an all-in-one secure environment” according to its website.

No one can underestimate the financial strain Covid-19 has put on startups – especially where funding is concerned. However, the services offered by Nth Round’s are perhaps more important now than ever before. Having raised USD$4.3 million in seed funding initially, Nth Round is an invaluable lifeline for companies in need of accessing their liquidity.

Nth Round’s website stresses, “we envision a time in the near future when founders, family members, investors, and key employees will be free to buy or sell their shares at any time, without worry, hassle, or prohibitive fees.” Of the range of services offered, Nth Round can provide: employee incentives, ownership transference, stakeholder management and unlocking liquidity. Free resources are also offered to “educate fledgling enterprises” on how to expand.

In June 2020, Nth Round expanded their operations and partnered with Stockton Real Estate Advisors to provide investors with real-time, 24/7 access to their investment portfolio information. Chris McConnell, Founder of Nth Round and HBS alumni said, “our one-stop-shop platform will serve to assist the Stockton team in distributing in real-time, all relevant investment-related materials, while most importantly giving Stockton the opportunity to powerfully and uniquely showcase new prospective additions to the Stockton portfolio”.

What’s more, Sean Myers, Stockton’s Head of Acquisitions and Development, added, “Powered by Nth Round, our private, proprietary program enables our investors to access financial reports, K-1’s, tax information, and periodic operating updates about the properties in which they have invested”. The investment management process can surely enhance investor’s clarity, convenience and transparency.

Source: https://www.crowdfundinsider.com/2020/07/163543-fintech-company-nth-round-a-viable-option-for-startups-and-smes-during-covid-19/

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Fintech

Social media payments friend or foe (John Burgos)

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Social media, like any other innovation, is likely to go through a refinement period, which seems like a never-ending process of updates and improvements. Despite its substantial list of pros and cons, social media sites and apps have been here for more than a decade and its footprint in today’s society is both profound and undeniable.  

The social media technology pioneers that have changed how we socially interact, have moved the bar again, by implementing a payment gateway within the social media ecosystem.  It has now changed how we may make payments to our friends, family and associates. If you thought that social media technology was a big disrupter to our social interactions, think about how social media payments can disrupt the payments business.  One might ponder if social media payments can be the catalyst for a cashless society one day.

Social media platforms have all the right ingredients needed for having a strong payment platform, it can reach across distant and remote locations, a huge consumer base that increases exponentially, ease of use with far better customized user interface than other mobile or web applications, social cohesion across the consumers that can easily initiate a channel of communication.

Despite all these benefits, the adoption of social media payments is considerably lower than expected, when compared to the adoption of other recent payment trends, such as real time payments and mobile payments. PayPal first popularized the trend, and other companies have since hatched their own versions, including Apple Pay, Twitter Buy, Google Wallet, WhatsApp Pay, Venom, Snapcash.

Facebook, who owns WhatsApp, a social media messenger app, with a user base of 200 million and growing, could prove to be a full-fledged social media payment platform. Given WhatsApp’s platform: broad set of payment streams, reinforcement of business opportunities via virtual offices and direct sales, ability to personalize selling opportunities based on consumer data, and quicker payment via the right consumer footprint, the use case of social media payments is vast.

Considering the massive database of users that social media possesses, and the payment capabilities readily available today via technology, it made perfect sense to bring the two together…right?

So, what are some of the challenges of social media payments you might ask… Cybersecurity?

If the systems are compromised, hackers can potentially access the bank information for every user.  It is easy to manipulate the payments on the app, all one needs is access to the mobile device with the social media app logged in. The case is similar for mobile banking, but in mobile banking the app session logs out after non usage (for a defined time interval), which is not the same in the case of social media payments. Your phone’s security features will be more important than ever, as social media payment apps will require PIN and Biometrics for authorization and authentication purposes to access your social media apps and it’s payments functions.

So, should you view social media payment as a friend or a foe?  If social media payments, like any other innovation, goes through its refinement period related to cybersecurity.  We can then expect that one day social media payments will be considered a friend to most, and consequently, drive growth of social payments.  

Source: https://www.finextra.com/blogposting/18964/social-media-payments-friend-or-foe?utm_medium=rssfinextra&utm_source=finextrablogs

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Crowdfunding

Crypto Industry Slams Wirecard and Misplaced Funds: “You don’t get what you expect. You get what you inspect.” 

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Wirecard AG (WPI:DE)  has emerged as one of the most embarrassing financial debacles in years in Germany. The implosion of the Fintech has demolished the reputation of the former CEO Markus Braun who was subsequently arrested following the revelation of €1.9 billion in missing funds. Terminated Wirecard COO Jan Marselek is still missing and said to be somewhere in Asia. The company has filed for bankruptcy protection as, currently, there are more questions than answers. Shares in Wirecard have nosedived from around €100/share to trade in the single digits as investors get wiped-out.

There has been a good amount of navel-gazing and finger-pointing from both elected and appointed officials in Germany. The European Commission has initiated its own inquiry as everyone attempts to sort out what went wrong for the once prominent member of the German DAX.

Crowdfund Insider has received several comments regarding the Wirecard tragedy from the digital asset sector. These opinion’s are shared below:


Jeff Truitt, Chief Legal Officer at Securrency stated:

“An old management principle holds: “You don’t get what you expect. You get what you inspect.”

Truitt said the Wirecard scandal is shocking because marquee institutions apparently failed to detect systemic fraud.

“Ernst & Young, the Dax index, and the German regulator BaFin are each known for their quality and reliability, yet unscrupulous actors at Wirecard seem to have engaged in wrongful activity for far longer than they should have. Despite the highest standards, the system failed. The only hero in the saga seems to be the Financial Times, which started reporting on accounting irregularities at Wirecard as early as 2015 in its “House of Wirecard” series. Wirecard originated as a payment processor for gambling and porn sites and does not appear to have branched out to service crypto firms in any meaningful way. As reported yesterday, Wirecard’s UK subsidiary issued two crypto payment cards which have now resumed operation. Few of the press articles relating to Wirecard mention virtual currency at all. Payment card issuers like Curve and Pockit have experienced disruptions as a consequence of the Wirecard collapse that are likely to persist for a while.”

Seamus Donoghue, VP of Sales and Business Development at METACO said:

“Wirecard AG, a payment service provider that began processing payments for gambling and pornographic websites 20 years ago, has grown to become a bluechip DAX listed German tech darling. With a peak market capitalization of 25 billion dollars, it counts Olympus, Getty Images, Orange, and KLM among its customers. As a payment service provider, merchants use it to accept payment through credit cards, PayPal, Apple Pay, and others. When Wirecard admitted that $2 billion might be “missing”, despite recovering from similar rumors over a year ago, its shares crashed from over €100 per share in mid-June, to a low of almost €1 a share, only to recover to around €3 per share as of today.”

Donoghue said that beyond the obvious damage to the auditor’s reputation that for over three years did not identify any irregularities and gave unqualified sign-offs on Wirecard’s financials, the most immediate victims from this scandal will be the equity and debt holders.

“In the longer term, this may result in a significant reputational hit for Wirecard’s partners. Given Wirecard’s origins working in sectors that other mainstream payment processors avoid, the firm was one of the chief issuers of prepaid credit cards for Fintech and crypto startups. Clients of Crypto.com and TenX, both Asia based crypto startups, saw their clients unable to use their cards immediately following the scandal – although according to recent reports, client funds have otherwise been unaffected. The reputational blow to the Fintech companies using Wirecard’s technology may be considerably more enduring: the argument that such companies could offer new services and products like cryptocurrencies, while their processes and funds were as safe as with traditional mainstream financial service providers, has been weakened.”

Donoghue noted that crypto markets have NOT been immune to scandals citing the recent report by the Ontario Securities Commission (OSC) regarding QuadrigaCX. The OSC revealed the crypto exchange as a Ponzi scam.

“QuadrigaCX or Wirecard will not be the only “bezzles” that emerge at this end of cycle period, however, they do present strong arguments for accelerating the adoption of decentralized payment models such as Bitcoin, where there is a single transparent source of truth that can be verified by anybody. Bitcoin’s immutable ledger largely eliminates the need for manual audits that rely on paper trails–bringing real-time compliance and oversight,” Donoghue said.

He added that many “cost frictions” in the existing payment infrastructure could be solved by simply removing intermediaries and counterparts through the use of a crypto-based payment solution, such as Bitcoin, which would radically reduce costs and de-risk current payment infrastructure.

“The building blocks to make this transition are evolving rapidly, with the recent news that payment giant PayPal is planning to offer Bitcoin to its 325 million customers. Overall, the ability to transition to a new more transparent, safer, and fairer payment framework is getting closer by the day,” claimed Donoghue.

Andrew Howell, Lead Blockchain Engineer at Blockdaemon said that crypto companies that use Wirecard as a card issuer have run into a number of challenges over the years. For instance, Crypto.com’s cards were blocked and have only recently started shipping in Europe, taking away from the initial hype amongst users who had to wait a long time to receive their cards.

Howell said that TenX is another company that had issues with Wirecard’s service.

“On a personal note, I paid for a TenX card back in 2018 and received it only a week before it was shut down. TenX lost my business since I didn’t bother waiting around for 2 years until they secured a new card issuer. I’m sure this was the case with many other users, and this will likely have a reputational effect on the company that is irreversible. Both Crypto.com and TenX are big players in the crypto debit card space and were gaining significant traction and customers. Unfortunately, both companies have been severely set back due to issues surrounding Wirecard. Customers may lose faith in these companies if they do not have their funds reimbursed in a timely manner and if the companies cannot get their cards reactivated or alternatively find a replacement card issuer in the near term.”

Howell added that in his opinion, this likely won’t affect new entrants to the crypto space as crypto debits cards have predominantly been acquired by enthusiasts who have been around the industry for a while.

Source: https://www.crowdfundinsider.com/2020/07/163555-crypto-industry-slams-wirecard-and-misplaced-funds-you-dont-get-what-you-expect-you-get-what-you-inspect/

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