Venmo woos retailers with branded, animated stickers for its newsfeed

Venmo’s newsfeed is about to get more interesting. Historically, the PayPal-owned app’s users would comment on their transactions using text, or as is more common, emoji. But now the company is planning to add support for custom, animated stickers, as well.

These animations were designed in partnership with Holler so they’re unique to the Venmo app and tailored to the sorts of transactions that take place there. For example, one is of a hoagie sandwich broken in half with text that reads “split the bill.” Another features a spinning pizza. One includes two characters pushing an IKEA shopping cart. And so on.

IKEA isn’t the only brand to be included in the new stickers, as it turns out — Subway and others are also participating, Venmo says. (Keurig was initially listed as a sticker partner, then pulled out at the last minute. Other news sites have still included the brand’s mention, but to be clear — it isn’t launching now.)

The move to introduce stickers — and particularly those featuring select retailers — comes at a time when Venmo is looking for ways to establish itself as a payment method of choice at brick-and-mortar stores. On that front, the company this past fall launched a rewards program tied to its physical Venmo card to offer users 5% back at stores like Target, Sephora, Dunkin’ Donuts, and Wendy’s, among others.

Though Venmo parent company PayPal had already tried to establish itself as an optional at checkout through point-of-sale integrations in years past, it never really took off. In more recent months, PayPal instead chose to partner instead of competing with payment rivals like Apple, Google, Visa, Mastercard, and others. Venmo, however, still has a shot at becoming at establishing a foothold in the physical retail space, thanks to its Venmo account-linked card and its forthcoming credit card.

In addition, its service is favored by millennial and Gen Z shoppers who often opt for non-traditional cards and banking products, like mobile banking apps and cards that also function as status symbol cards, like the new  Apple Card. Plus, they prefer visual communication when it comes to sharing what they’re spending — over 90% of Venmo transactions include emojis, the company notes.

Venmo says the new stickers in the app will help the retailers to better connect with Venmo users and could allow for tailored experiences, going forward. But not all the stickers are branded — some are just happy tacos or burritos, jars and mugs filled with pennies, and other generic images.

The stickers are rolling out, starting today, says Venmo.

Marijuana delivery giant Eaze may go up in smoke

The first cannabis startup to raise big money in Silicon Valley is in danger of burning out. TechCrunch has learned that pot delivery middleman Eaze has seen unannounced layoffs, and its depleted cash reserves threaten its ability to make payroll or settle its AWS bill. Eaze was forced to raise a bridge round to keep the lights on as it prepares to attempt major pivot to ‘touching the plant’ by selling its own marijuana brands through its own depots.

If Eaze fails, it could highlight serious growing pains amid the ‘green rush’ of startups into the marijuana business.

Eaze, the startup backed by some $166 million in funding that once positioned itself as the “Uber of pot” — a marketplace selling pot and other cannabis products from dispensaries and delivering it to customers — has recently closed a $15 million bridge round, according to multiple source. The fund was meant to keep the lights on as Eaze struggles to raise its next round of funding amid problems with making decent margins on its current business model, lawsuits, payment processing issues, and internal disorganization.

 

An Eaze spokesperson confirmed that the company is low on cash. Sources tell us that the company, which laid off some 30 people last summer, is preparing another round of cuts in the meantime. The spokesperson refused to discuss personnel issues but noted that there have been layoffs at many late stage startups as investors want to see companies cut costs and become more efficient.

From what we understand, Eaze is currently trying to raise a $35 million Series D round according to its pitch deck. The $15 million bridge round came from unnamed current investors. (Previous backers of the company include 500 Startups, DCM Ventures, Slow Ventures, Great Oaks, FJ Labs, the Winklevoss brothers, and a number of others.) Originally, Eaze had tried to raise a $50 million Series D, but the investor that was looking at the deal, Athos Capital, is said to have walked away at the eleventh hour.

Eaze is going into the fundraising with an enterprise value of $388 million, according to company documents reviewed by TechCrunch. It’s not clear what valuation it’s aiming for in the next round.

An Eaze spokesperson declined to discuss fundraising efforts but told TechCrunch, “The company is going through a very important transition right now, moving to becoming a plant-touching company through acquisitions of former retail partners that will hopefully allow us to more efficiently run the business and continue to provide good service to customers.

Desperate to grow margins

The news comes as Eaze is hoping to pull off a “verticalization” pivot, moving beyond online storefront and delivery of third-party products (rolled joints, flower, vaping products and edibles) and into sourcing, branding and dispensing the product directly. Instead of just moving other company’s marijuana brands between third-party dispensaries and customers, it wants to sell its own in-house brands through its own delivery depots to earn a higher margin. With a number of other cannabis companies struggling, the hope is that it will be able to acquire brands in areas like marijuana flower, pre-rolled joints, vaporizer cartridges, or edibles at low prices.

An Eaze spokesperson confirmed that the company plans to announce the pivot in the coming days, telling TechCrunch that it’s “a pretty significant change from provider of services to operating in that fashion but also operating a depot directly ourselves.”

The startup is already making moves in this direction, and is in the process of acquiring some of the assets of a bankrupt cannabis business out of Canada called Dionymed — which had initially been a partner of Eaze’s, then became a competitor, and then sued it over payment disputes, before finally selling part of its business. These assets are said to include Oakland dispensary Hometown Heart, which it acquired in an all-share transaction (“Eaze effectively bought the lawsuit,” is how one source described the sale). This will become Eaze’s first owned delivery depot.

In a recent presentation deck that Eaze has been using when pitching to investors — which has been obtained by TechCrunch — the company describes itself as the largest direct-to-consumer cannabis retailer in California. It has completed more than 5 million deliveries, served 600,000 customers and tallied up an average transaction value of $85. 

To date, Eaze has only expanded to one other state beyond California, Oregon. Its aim is to add five more states this year, and another three in 2021. But the company appears to have expected more states to legalize recreational marijuana sooner, which would have provided geographic expansion. Eaze seems to have overextended itself too early in hopes of capturing market share as soon as it became available.

An employee at the company tells us that on a good day Eaze can bring in between $800,000 and $1 million in net revenue, which sounds great, except that this is total merchandise value, before any cuts to suppliers and others are made. Eaze makes only a fraction of that amount, one reason why it’s now looking to verticatlize into more of a primary role in the ecosystem. And that’s before considering all of the costs associated with running the business. 

Eaze is suffering from a problem rampant in the marijuana industry: a lack of working capital. Since banks often won’t issue working capital loans to weed-related business, deliverers like Eaze can experience delays in paying back vendors. A source says late payments have pushed some brands to stop selling through Eaze.

Another drain on its finances have been its marketing efforts. A source said out-of-home ads (billboards and the like) allegedly were a significant expense at one point. It has to compete with other pot purchasing options like visiting retail stores in person, using dispensaries’ in-house delivery services, or buying via startups like Meadow that act as aggregated online points of sale for multiple dispensaries.

Indeed, Eaze claims that its pivot into verticalization will bring it $204 million in revenues on gross transactions of $300 million. It notes in the presentation that it makes $9.04 on an average sale of $85, which will go up to $18.31 if it successfully brings in ‘private label’ products and has more depot control.

Selling weed isn’t eazy

The poor margins are only one of the problems with Eaze’s current business model, which the company admits in its presentation have led to an inconsistent customer experience and poor customer affinity with its brand — especially in the face of competition from a number of other delivery businesses.  

Playing on the on-demand, delivery-of-everything theme, it connected with two customer bases. First, existing cannabis consumers already using some form of delivery service for their supply; and a newer, more mainstream audience with disposable income that had become more interested in cannabis-related products but might feel less comfortable walking into a dispensary, or buying from a black market dealer.

It is not the only startup that has been chasing that audience. Other competitors in the wider market for cannabis discovery, distribution and sales include Weedmaps, Puffy, Blackbird, Chill (a brand from Dionymed that it founded after ending its earlier relationship with Eaze), and Meadow, with the wider industry estimated to be worth some $11.9 billion in 2018 and projected to grow to $63 billion by 2025.

Eaze was founded on the premise that the gradual decriminalisation of pot — first making it legal to buy for medicinal use, and gradually for recreational use — would spread across the US and make the consumption of cannabis-related products much more ubiquitous, presenting a big opportunity for Eaze and other startups like it. 

It found a willing audience among consumers, but also tech workers in the Bay Area, a tight market for recruitment. 

“I was excited for the opportunity to join the cannabis industry,” one source said. “It has for the most part has gotten a bad rap, and I saw Eaze’s mission as a noble thing, and the team seemed like good people.”

Eaze CEO Ro Choy

That impression was not to last. The company, this employee was told when joining, had plenty of funding with more on the way. The newer funding never materialised, and as Eaze sought to figure out the best way forward, the company cycled through different ideas and leadership: former Yammer executive Keith McCarty, who cofounded the company with Roie Edery (both are now founders at another Cannabis startup, Wayv), left, and the CEO role was given to another ex-Yammer executive, Jim Patterson, who was then replaced by Ro Choy, who is the current CEO. 

“I personally lost trust in the ability to execute on some of the vision once I got there,” the ex-employee said. “I thought that on one hand a picture was painted that wasn’t the truth. As we got closer and as I’d been there longer and we had issues with funding, the story around why we were having issues kept changing.” Several sources familiar with its business performance and culture referred to Eaze as a “shitshow”.

No ‘Push For Kush’

The quick shifts in strategy were a recurring pattern that started well before the company got tight financial straits. 

One employee recalled an acquisition Eaze made several years ago of a startup called Push for Pizza. Founded by five young friends in Brooklyn, Push for Pizza had gone viral over a simple concept: you set up your favourite pizza order in the app, and when you want it, you pushed a single button to order it. (Does that sound silly? Don’t forget, this was also the era of Yo, which was either a low point for innovation, or a high point for cynicism when it came to average consumer intelligence… maybe both.)

Eaze’s idea, the employee said, was to take the basics of Push for Pizza and turn it into a weed app, Push for Kush. In it, customers could craft their favourite mix and, at the touch of a button, order it, lowering the procurement barrier even more.

The company was very excited about the deal and the prospect of the new app. They planned a big campaign to spread the word, and held an internal event to excite staff about the new app and business line. 

“They had even made a movie of some kind that they showed us, featuring a caricature of Jim” — the CEO at a the time — “hanging out of the sunroof of a limo.” (I’ve been able to find the opening segment of this video online, and the Twitter and Instagram accounts that had been created for Push for Kush, but no more than that.)

Then just one week later, the whole plan was scrapped, and the founders of Push for Pizza fired. “It was just brushed under the carpet,” the former employee said. “No one could get anything out of management about what had happened.”

Something had happened, though: the company had been taking payments by card when it made the acquisition, but the process was never stable and by then it had recently gone back to the cash-only model. Push for Kush by cash was less appealing. “They didn’t think it would work,” the person said, adding that this was the normal course of business at the startup. “Big initiatives would just die in favor of pushing out whatever new thing was on the product team’s radar.” 

Eaze’s spokesperson confirmed that “we did acquire Push For Pizza . . but ultimately didn’t choose to pursue [launching Push For Kush].”

Payments were a recurring issue for the startup. Eaze started out taking payments only in cash — but as the business grew, that became increasingly problematic. The company found itself kicked off the credit card networks and was stuck with a less traceable, more open to error (and theft) cash-only model at a time when one employee estimated it was bringing in between $800,000 and $1 million per day in sales. 

Eventually, it moved to cards, but not smoothly: Visa specifically did not want Eaze on its platform. Eaze found a workaround, employees say, but it was never above board, which became the subject of the lawsuit between Eaze and Dionymed. Currently the company appear to only take payments via debit cards, ACH transfer, and cash, not credit card.

Another incident sheds light on how the company viewed and handled security issues. 

Can Eaze rise from the ashes?

At one point, employees allegedly discovered that Eaze was essentially storing all of its customer data — including users’ signatures and other personal information — in an Azure bucket that was not secured, meaning that if anyone was nosing around, it could be easily discovered and exploited.

The vulnerability was brought to the company’s attention. It was something that was up to product to fix, but the job was pushed down the list. It ultimately took seven months to patch this up. “I just kept seeing things with all these huge holes in them, just not ready for prime time,” one ex-employee said of the state of products. “No one was listening to engineers, and no one seemed to be looking for viable products.” Eaze’s spokesperson confirms a vulnerability was discovered but claims it was promptly resolved.

Today, the issue is a more pressing financial one: the company is running out of money. Employees have been told the company may not make its next payroll, and AWS will shut down its servers in two days if it doesn’t pay up. 

Eaze’s spokesperson tried to remain optimistic while admitting the dire situation the company faces. “Eaze is going to continue doing everything we can to support customers and the overall legal cannabis industry. We’re excited about the future and acknowledge the challenges that the entire community is facing.”

As medicinal and recreational marijuana access became legal in some states in the latter 2010s, entrepreneurs and investors flocked to the market. They saw an opportunity to capitalize on the end of a major prohibition — a once in a lifetime event. But high government taxes, enduring black markets, intense competition, and a lack of financial infrastructure willing to deal with any legal haziness have caused major setbacks.

While the pot business might sound chill, operations like Eaze depend on coordinating high-stress logistics with thin margins and little room for error. Plenty of food delivery startups from Sprig to Munchery went under after running into similar struggles, and at least banks and payment processors would work with them. With the odds stacked against it, Eaze has a tough road ahead.

Daily Crunch: Visa makes a $5.3 billion acquisition

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. Visa is acquiring Plaid for $5.3 billion, 2x its final private valuation

You can compare what Plaid does to Stripe — but instead of facilitating payments, Plaid helps developers share banking and other financial information more easily.

Plaid raised $250 million at the end of 2018, with both Mastercard and Visa quietly participating in the round. So Visa must be pretty happy with how the startup has developed since then.

2. Google wants to phase out support for third-party cookies in Chrome within two years

The fact that Google will drop support for these cookies — which are typically used to track users across the web — doesn’t necessarily come as a surprise, given the company’s announcements around privacy in Chrome. But this aggressive timeline is new.

3. Disney+ was the most downloaded app in the US in Q4 2019

Following the app’s mid-November launch in the U.S., Disney+ was downloaded more than 30 million times in Q4 2019 — according to a new report from SensorTower, that’s more than double the downloads for the runner-up, TikTok.

4. Spotify and Warner Chappell end dispute in India, sign global licensing deal

The announcement marks the end of the companies’ litigation before the Bombay High Court, where Warner Music was seeking an injunction to prevent Spotify from using its music in India. Spotify ended up launching in India anyway, but without a number of Warner Music titles.

5. The robot homecoming is upon us

Home robots have already had a few false starts, including some high-profile flare-outs like Anki and previous CES darling Kuri. But Darrell Etherington argues that between slow-burn categories and the sheer volume of newer products, it now seems certain we’re on a path that will lead to robots becoming common household items. (Extra Crunch membership required.)

6. Atrium lays off lawyers, explains pivot to legal tech

Moving forward, the Justin Kan-founded startup will focus on its software for startups navigating fundraising, hiring and collaborating with lawyers. Atrium also plans to ramp up its startup advising services, and it’s doubling down on its year-old network of professional service providers that help clients navigate day-to-day legal work.

7. Disrupting Space: A new event from TechCrunch

The show will be held at Gateway Sheraton Hotel in Los Angeles on June 25, right in the neighborhood of America’s most powerful players in space, including Boeing, Northrop, Lockheed, Raytheon, Teledyne, The Aerospace Corporation, the U.S. Air Force and, of course, SpaceX.

2019 saw a stampede of fintech unicorns

Two years ago, we created the Matrix FinTech Index to highlight what we saw as the beginnings of a 10+ year mega innovation wave in financial services.

The trillion-dollar financial services industry was going to be turned on its head over the next decade, and we were just getting started. At the time, the top 10 publicly traded U.S. fintech companies had just surpassed the $100 billion mark in terms of total market capitalization, 12 unicorns had emerged in the category, and the U.S. VC industry had just poured in $6.7B — a record at the time.

As we predicted last year, the innovation cycle continues, and we are transitioning into its mid-phase. So what happened in U.S. fintech in 2019? In short, monster growth.

On the public side, fintechs delivered resoundingly. PayPal alone gained $26B in market capitalization. On a return basis, the public Matrix FinTech Index continued to crush every major equity index as well as the financial services incumbents. Nicely matching our forecasts, our Index delivered 213% returns over the last three years. The Index outperformed the financial services incumbents by 151 percentage points and the S&P 500 by 170 percentage points.

Paytm targets merchants to fight back Google and Walmart in India’s crowded payments field

Paytm today announced two new features for businesses as the financial services firm looks to expand its reach in the nation that has quickly become one of the world’s most crowded and competitive payments markets.

The Noida-headquartered firm, which raised $1 billion in late November, said its app for businesses now features an “all-in-one” QR code system to accept payments from multiple platforms, including mobile wallets (that act as an intermediary between a user and their bank but provide convenience) and those that are powered by UPI, a payments infrastructure built by a coalition of banks that has been widely adopted by the industry players.

Merchants had expressed an interest in having one QR code that could understand any payments app, said Vijay Shekhar Sharma, the founder and chief executive of Paytm’s parent firm One97 Communications. In addition to supporting mobile wallet apps, and UPI-powered payment apps, Paytm’s new QR codes also support payments through popular Rupay cards.

Merchants can also stick these QR codes on devices such as battery packs and chargers to enable quick transaction from users, Sharma explained at a press conference today.

Bookkeeping for merchants and small businesses

The nation’s highest-valued startup (at around $16 billion) also announced a bookkeeping feature for businesses to help them maintain their daily records. The feature is already rolling out to merchants, Sharma told TechCrunch.

Dubbed Paytm Business Khata, the feature will help merchants manage payments, record transactions and secure loans and insurance. The service will also enable them to set a reminder for credit transactions, get an audio alert when they have received new payment, and send links to their customers to easily pay their dues, said Sharma.

Hundreds of millions of Indians, many in small towns and villages, came online for the first time in the last decade thanks to the proliferation of cheap Android smartphones and the availability of some of the world’s cheapest mobile data plans.

In recent years, millions of merchants and small businesses have also started to accept digital payments and listed them on the web for the first time. But most of them are still offline. Scores of startups and heavily backed firms such as Google, Walmart and Amazon are chasing this untapped market.

Google, which has amassed more than 67 million users on its payments app in India, last year announced a range of offerings to allow businesses to easily start accepting payments online. In the past, the company also launched tools to help mom and pop stores build presence on the web.

A number of startups today, including Bangalore-based Instamojo, Khatabook (which raised $25 million in October last year and counts GGV Capital, Sequoia Capital India and Tencent among its investors) and Lightspeed-backed OkCredit, which raised $67 million in August last year, offer bookkeeping features and allow their consumers to enable easier payment options.

Google Pay or GPay sticker pasted on the glass of a car in New Delhi India on 18 September 2019 (Photo by Nasir Kachroo/NurPhoto via Getty Images)

Paytm’s Sharma claimed that his business app has already amassed more than 10 million merchant users, a number he expects to more than double by next year.

The announcements today illustrate how aggressively Paytm, which once led the mobile payments market in India, is expanding its service. Some critics have cautioned that the firm, which counts SoftBank, Alibaba and T. Rowe Price among its key investors and has raised over $3.3 billion to date, is quickly losing its market share and chasing opportunities that could significantly increase its expenses and losses. According to several industry estimates, Google Pay and Walmart’s PhonePe now lead the mobile payments market in India.

Paytm lost more than half a billion dollars in the financial year that ended in March 2019. The trouble for the company is that there is currently little money to be made in the payments market because of some of the local guidelines set by the government.

“The current Paytm’s potential is a pale shadow of its former self. And to stay relevant, the company is entering new businesses (and failing spectacularly in some) at a pace that shows both a lack of clarity and urgency. Paytm is stuck between a glorious past that was built on the back of digital payments and a future that doesn’t look anything like Jack Ma’s Alibaba, one of Paytm’s largest investors and Sharma’s inspiration,” wrote Ashish Mishra, a long-time journalist, in a scathing post (paywalled).

Sharma said today that the company plans to offer services such as stock brokerage and insurance brokerage in the coming months. At stake is India’s payments market that is estimated to be worth $1 trillion in the next four years, up from about $200 billion currently, according to Credit Suisse. And that market is only going to get more crowded when WhatsApp, which has amassed over 400 million users in India, rolls out its payments service to all its users in the country in the coming months.

Fintech’s next decade will look radically different

The birth and growth of financial technology developed mostly over the last ten years.

So as we look ahead, what does the next decade have in store? I believe we’re starting to see early signs: in the next ten years, fintech will become portable and ubiquitous as it moves to the background and centralizes into one place where our money is managed for us.

When I started working in fintech in 2012, I had trouble tracking competitive search terms because no one knew what our sector was called. The best-known companies in the space were Paypal and Mint.

fintech search volume

Google search volume for “fintech,” 2000 – present.

Fintech has since become a household name, a shift that came with with prodigious growth in investment: from $2 billion in 2010 to over $50 billion in venture capital in 2018 (and on-pace for $30 billion+ this year).

Predictions were made along the way with mixed results — banks will go out of business, banks will catch back up. Big tech will get into consumer finance. Narrow service providers will unbundle all of consumer finance. Banks and big fintechs will gobble up startups and consolidate the sector. Startups will each become their own banks. The fintech ‘bubble’ will burst.

https://techcrunch.com/2019/12/22/who-will-the-winners-be-in-the-future-of-fintech/

Here’s what did happen: fintechs were (and still are) heavily verticalized, recreating the offline branches of financial services by bringing them online and introducing efficiencies. The next decade will look very different. Early signs are beginning to emerge from overlooked areas which suggest that financial services in the next decade will:

  1. Be portable and interoperable: Like mobile phones, customers will be able to easily transition between ‘carriers’.
  2. Become more ubiquitous and accessible: Basic financial products will become a commodity and bring unbanked participants ‘online’.
  3. Move to the background: The users of financial tools won’t have to develop 1:1 relationships with the providers of those tools.
  4. Centralize into a few places and steer on ‘autopilot’.

Prediction 1: The open data layer

Thesis: Data will be openly portable and will no longer be a competitive moat for fintechs.

Personal data has never had a moment in the spotlight quite like 2019. The Cambridge Analytica scandal and the data breach that compromised 145 million Equifax accounts sparked today’s public consciousness around the importance of data security. Last month, the House of Representatives’ Fintech Task Force met to evaluate financial data standards and the Senate introduced the Consumer Online Privacy Rights Act.

A tired cliché in tech today is that “data is the new oil.” Other things being equal, one would expect banks to exploit their data-rich advantage to build the best fintech. But while it’s necessary, data alone is not a sufficient competitive moat: great tech companies must interpret, understand and build customer-centric products that leverage their data.

Why will this change in the next decade? Because the walls around siloed customer data in financial services are coming down. This is opening the playing field for upstart fintech innovators to compete with billion-dollar banks, and it’s happening today.

Much of this is thanks to a relatively obscure piece of legislation in Europe, PSD2. Think of it as GDPR for payment data. The UK became the first to implement PSD2 policy under its Open Banking regime in 2018. The policy requires all large banks to make consumer data available to any fintech which the consumer permissions. So if I keep my savings with Bank A but want to leverage them to underwrite a mortgage with Fintech B, as a consumer I can now leverage my own data to access more products.

Consortia like FDATA are radically changing attitudes towards open banking and gaining global support. In the U.S., five federal financial regulators recently came together with a rare joint statement on the benefits of alternative data, for the most part only accessible through open banking technology.

The data layer, when it becomes open and ubiquitous, will erode the competitive advantage of data-rich financial institutions. This will democratize the bottom of the fintech stack and open the competition to whoever can build the best products on top of that openly accessible data… but building the best products is still no trivial feat, which is why Prediction 2 is so important:

Prediction 2: The open protocol layer

Thesis: Basic financial services will become simple open-source protocols, lowering the barrier for any company to offer financial products to its customers.

Picture any investment, wealth management, trading, merchant banking, or lending system. Just to get to market, these systems have to rigorously test their core functionality to avoid legal and regulatory risk. Then, they have to eliminate edge cases, build a compliance infrastructure, contract with third-party vendors to provide much of the underlying functionality (think: Fintech Toolkit) and make these systems all work together.

The end result is that every financial services provider builds similar systems, replicated over and over and siloed by company. Or even worse, they build on legacy core banking providers, with monolith systems in outdated languages (hello, COBOL). These services don’t interoperate, and each bank and fintech is forced to become its own expert at building financial protocols ancillary to its core service.

But three trends point to how that is changing today:

First, the infrastructure and service layer to build is being disaggregates, thanks to platforms like Stripe, Marqeta, Apex, and Plaid. These ‘finance as a service’ providers make it easy to build out basic financial functionality. Infrastructure is currently a hot investment category and will be as long as more companies get into financial services — and as long as infra market leaders can maintain price control and avoid commoditization.

Second, industry groups like FINOS are spearheading the push for open-source financial solutions. Consider a Github repository for all the basic functionality that underlies fintech tools. Developers could continuously improve the underlying code. Software could become standardized across the industry. Solutions offered by different service providers could become more inter-operable if they shared their underlying infrastructure.

And third, banks and investment managers, realizing the value in their own technology, are today starting to license that technology out. Examples are BlackRock’s Aladdin risk-management system or Goldman’s Alloy data modeling program. By giving away or selling these programs to clients, banks open up another revenue stream, make it easy for the financial services industry to work together (think of it as standardizing the language they all use), and open up a customer base that will provide helpful feedback, catch bugs, and request new useful product features.

As Andreessen Horowitz partner Angela Strange notes, “what that means is, there are several different infrastructure companies that will partner with banks and package up the licensing process and some regulatory work, and all the different payment-type networks that you need. So if you want to start a financial company, instead of spending two years and millions of dollars in forming tons of partnerships, you can get all of that as a service and get going.”

Fintech is developing in much the same way computers did: at first software and hardware came bundled, then hardware became below differentiated operating systems with ecosystem lock-in, then the internet broke open software with software-as-a-service. In that way, fintech in the next ten years will resemble the internet of the last twenty.

placeholder vc infographic

Infographic courtesy Placeholder VC

Prediction 3: Embedded fintech

Thesis: Fintech will become part of the basic functionality of non-finance products.

The concept of embedded fintech is that financial services, rather than being offered as a standalone product, will become part of the native user interface of other products, becoming embedded.

This prediction has gained supporters over the last few months, and it’s easy to see why. Bank partnerships and infrastructure software providers have inspired companies whose core competencies are not consumer finance to say “why not?” and dip their toes in fintech’s waters.

Apple debuted the Apple Card. Amazon offers its Amazon Pay and Amazon Cash products. Facebook unveiled its Libra project and, shortly afterward, launched Facebook Pay. As companies from Shopify to Target look to own their payment and purchase finance stacks, fintech will begin eating the world.

If these signals are indicative, financial services in the next decade will be a feature of the platforms with which consumers already have a direct relationship, rather than a product for which consumers need to develop a relationship with a new provider to gain access.

Matt Harris of Bain Capital Ventures summarizes in a recent set of essays (one, two) what it means for fintech to become embedded. His argument is that financial services will be the next layer of the ‘stack’ to build on top of internet, cloud, and mobile. We now have powerful tools that are constantly connected and immediately available to us through this stack, and embedded services like payments, transactions, and credit will allow us to unlock more value in them without managing our finances separately.

Fintech futurist Brett King puts it even more succinctly: technology companies and large consumer brands will become gatekeepers for financial products, which themselves will move to the background of the user experiences. Many of these companies have valuable data from providing sticky, high-affinity consumer products in other domains. That data can give them a proprietary advantage in cost-cutting or underwriting (eg: payment plans for new iPhones). The combination of first-order services (eg: making iPhones) with second-order embedded finance (eg: microloans) means that they can run either one as a loss-leader to subsidize the other, such as lowering the price of iPhones while increasing Apple’s take on transactions in the app store.

This is exciting for the consumers of fintech, who will no longer have to search for new ways to pay, invest, save, and spend. It will be a shift for any direct-to-consumer brands, who will be forced to compete on non-brand dimensions and could lose their customer relationships to aggregators.

Even so, legacy fintechs stand to gain from leveraging the audience of big tech companies to expand their reach and building off the contextual data of big tech platforms. Think of Uber rides hailed from within Google Maps: Uber made a calculated choice to list its supply on an aggregator in order to reach more customers right when they’re looking for directions.

Prediction 4: Bringing it all together

Thesis: Consumers will access financial services from one central hub.

In-line with the migration from front-end consumer brand to back-end financial plumbing, most financial services will centralize into hubs to be viewed all in one place.

For a consumer, the hub could be a smartphone. For a small business, within Quickbooks or Gmail or the cash register.

As companies like Facebook, Apple, and Amazon split their operating systems across platforms (think: Alexa + Amazon Prime + Amazon Credit Card), benefits will accrue to users who are fully committed to one ecosystem so that they can manage their finances through any platform — but these providers will make their platforms interoperable as well so that Alexa (e.g.) can still win over Android users.

As a fintech nerd, I love playing around with different financial products. But most people are not fintech nerds and prefer to interact with as few services as possible. Having to interface with multiple fintechs separately is ultimately value subtractive, not additive. And good products are designed around customer-centric intuition. In her piece, Google Maps for Money, Strange calls this ‘autonomous finance:’ your financial service products should know your own financial position better than you do so that they can make the best choices with your money and execute them in the background so you don’t have to.

And so now we see the rebundling of services. But are these the natural endpoints for fintech? As consumers become more accustomed to financial services as a natural feature of other products, they will probably interact more and more with services in the hubs from which they manage their lives. Tech companies have the natural advantage in designing the product UIs we love — do you enjoy spending more time on your bank’s website or your Instagram feed? Today, these hubs are smartphones and laptops. In the future, could they be others, like emails, cars, phones or search engines?

As the development of fintech mirrors the evolution of computers and the internet, becoming interoperable and embedded in everyday services, it will radically reshape where we manage our finances and how little we think about them anymore. One thing is certain: by the time I’m writing this article in 2029, fintech will look very little like it did today.

So which financial technology companies will be the ones to watch over the next decade? Building off these trends, we’ve picked five that will thrive in this changing environment.

Why Bill.com didn’t pursue a direct listing

Bill.com went public today after pricing its shares higher than it initially expected. The B2B payments company sold nearly 10 million shares at $22 apiece, raising around $216 million in its IPO. Public investors felt that the company’s price was a deal, sending the value of its equity to $35.51 per share as of the time of writing.

That’s a gain of over 61%.

On the heels of its successful pricing run and raucous first day’s trading, TechCrunch caught up with Bill.com CEO René Lacerte to dig into his company’s debut. We wanted to know how pricing went, and whether the company (which possibly could have valued itself more richly during its IPO pricing, given its first-day pop) had considered a direct listing.

Lacerte detailed what resonated with investors while pricing Bill.com’s shares, and also did a good job outlining his perspective on what matters for companies that are going public. As a spoiler, he wasn’t super focused on the company’s first-day return.

For more on the Bill.com IPO’s nuts and bolts, head here. Let’s get into the interview.

René Lacerte

The following interview has been edited for length and clarity. Questions have been condensed.

TechCrunch: How did your IPO pricing feel, and what did you learn from the process?

Lacerte: I think the whole experience has been an incredible learning experience from a capitalism perspective; that’s probably a broader conversation. But you know, it really came down to how our story resonated with investors, and so there’s three components that we kind of really talked to folks about.

Omni storage & rentals fails, shutters, sells engineers to Coinbase

$35 million-funded Omni is packing up and shutting down after struggling to make the economics of equipment rentals and physical on-demand storage work out. It’s another victim of a venture capital-subsidized business offering a convenient service at an unsustainable price.

The startup fought for a second wind after selling off its physical storage operations to competitor Clutter in May. Then sources tell me it tried to build a whitelabel software platform for letting brick-and-mortar merchants rent stuff like drills or tents as well as sell them so Omni could get out of hands-on logistics. But now the whole company is folding, with Coinbase hiring roughly 10 of Omni’s engineers.

“They realized that the core business was just challenging as architected” a source close to Omni tells TechCrunch. “The service was really great for the consumer but when they looked at what it would take to scale, that would be difficult and expensive.” Another source says Omni’s peak headcount was around 70.

The news follows TechCrunch’s report in October that Omni had laid off operations teams members and was in talks to sell its engineering team to Coinbase. Omni had internally discussed informing its retail rental partners ahead of time that it would be shutting down. Meanwhile, it frantically worked to stop team members from contacting the press about the startup’s internal troubles.

We’ll be winding down operations at Omni and closing the platform by the end of this year. We are proud of what we built and incredibl y thankful for everyone who supported our vision over the past five and a half years” an Omni spokesperson says. Omni CEO Tom McLeod did not respond to multiple requests for comment. Oddly, Omni was still allowing renters to pay for items as of this morning, though it’s already shut down its blog and hasn’t made a public announcement about its shut down.

Coinbase has reached an agreement with Omni to hire members of its engineering team. We’re always looking for top-tier engineering talent and look forward to welcoming these new team members to Coinbase” a Coinbase spokesperson tells us. The team was looking for more highly skilled engineers they could efficiently hire as a group, though it’s too early to say what they’ll be working on.

Omni originaly launched in 2015, offering to send a van to your house to pick up and index any of your possession, drive them to a nearby warehouse, store them, and bring them back to you whenever you needed for just a few dollars per month. It seemed too good to be true and ended up being just that.

Eventually Omni pivoted towards letting you rent out what you were storing so you and it could earn some extra cash in 2017. Sensing a better business model there, it sold its storage business to Softbank-funded Clutter and moved to helping retail stores run rental programs. But that simply required too big of a shift in behavior for merchants and users, while also relying on slim margins.

Omni Rentals

One major question is whether investors will get any cash back. Omni raised $25 million from cryptocurrency company Ripple in early 2018. Major investors include Flybridge, Highland, Allen & Company, and Founders Fund, plus a slew of angels.

The implosion of Omni comes as investors are re-examining business fundamentals of startups in the wake of Uber’s valuation getting cut in half in the public markets and the chaos at WeWork ahead of its planned IPO. VCs and their LPs want growth, but not at the cost of burning endless sums of money to subsidize prices just to lure customers to a platform.

It’s one thing if the value of the service is so high that people will stick with a startup as prices rise to sustainable levels, as many have with ride hailing. But for Omni, ballooning storage prices pissed off users as on-demand became less afforable than a traditional storage unit. Rentals were a hassle, especially considering users had to pick-up and return items themselves when they could just buy the items and get instant delivery from Amazon.

Startups that need a ton of cash for operations and marketing but don’t have a clear path to ultra-high lifetime value they can earn from customers may find their streams of capital running dry.

India’s financial services firm Paytm raises $1B

Paytm said on Monday it has raised $1 billion in a new financing round as the Noida-headquartered firm, which once dominated the local mobile payments market, attempts to fight back giants Google, Walmart’s PhonePe, and Facebook.

The company said the new financing round was led by U.S. asset manager T Rowe Price. Existing investors Ant Financials (contributed $400 million), SoftBank Vision Fund (contributed $200 million), and Discovery Capital also participated in the round, which valued the company at about $16 billion — higher than some of the high-profile Asian startups such as Grab and Gojek.

Paytm founder and chief executive Vijay Shekhar Sharma said the firm will use the fresh capital to court merchants, and expand its financial offerings such as lending and insurance. The company, which also offers its mobile wallet service in Japan, has amassed 15 million merchants, he said.

The big buck comes as India becomes the newest payments battleground for major global giants Google, Walmart, and Facebook . According to Credit Suisse, the digital payments market in India will be worth $1 trillion in the next four years, up from about $200 billion currently.

More to follow…

India’s Razorpay launches corporate credit cards, current accounts support in major neo banking push

India’s RazorPay, one of the largest payments processing firms in the country, today announced a range of new services aimed at startups, businesses, merchants and freelancers as the Bangalore-based firm expands the reach of its financial platform in the nation.

The startup, which raised $75 million from Ribbit Capital and others in June this year, today introduced a new kind of corporate credit card and some banking services for startups and SMEs, and a new payment option for individuals to quickly receive money from their clients.

All of these services are solving some major challenges faced by tens of millions of businesses in the country. Even as startups are increasingly getting acceptance in Indian homes, banks in the nation are still wary of offering some financial services to them. Most “unprofitable” startups today can’t get a corporate credit card from a bank in India, for instance.

For its corporate credit card, Razorpay will assess other factors such as the flows and collections to determine who is eligible, the Bangalore-based startup’s founders — Harshil Mathur and Shashank Kumar — told TechCrunch in an interview.

The new corporate credit card, issued by RBL Bank, will allow businesses to access credit between Rs 50,000 ($700) and Rs 25,00,000 ($34,800). If they are able to pay it back in within 50 days, they will avoid any interest.

Razorpay also announced it is launching current accounts service. “While personal banking ecosystem in India has scaled tremendously in recent years, business banking is still old school,” said Mathur. “Most processes are still manual, and there is no communication among your invoice, payroll, booking systems. People have to deal with spreadsheet files.”

To solve this, Razorpay has built a neo banking platform. “As a business, if you want to create a current account bank with a bank, we take care of it. Everything — your transactions, and payables — happens on Razorpay’s platform and you can manage them through a single dashboard,” he said.

As part of this platform — and also as a standalone offering — Razorpay is offering a payroll management service. “One of the most common challenges in a business is how they handle payrolls. Most of these payrolls work with different systems such as HR and accounting. Again, you have to create spreadsheet files and provide it to the bank which does the processing. What our goal is that we will provide one single platform to manage payments better,” Mathur added.

To work on this service, Razorpay said it has acquired payroll and HR management software firm Opfin for what a person familiar with the matter said “a couple of millions of dollars.” Razorpay founders declined to comment on the amount.

And last, Razorpay has launched a new payment option for unregistered businesses such as mom and pop stores and freelancers. Millions of individuals in India today engage in business with one another, corporate companies, and clients overseas. For them, there exists a very limited set of options to receive payments from others and do it at a real-time pace.

Razorpay may have an answer. The company has launched a service that will allow individuals or businesses to create and send a link through text or email to their clients and receive payment in real-time. When the client clicks on the link, a payment gateway loads up that supports a range of paying options. “We support 100 currencies, so a person can have their money delivered from any country,” Mathur said. Another startup — Bangalore-based Instamojo — offers a similar functionality.

The announcements today illustrate Razorpay’s aggressive expansion into India’s burgeoning financial services market. The startup generates about 70% of its revenue today from its core business of processing payments.

More than 600,000 businesses in India including giants such as airline Indigo, Bombay Stock Exchange, conglomerate Reliance, Sony, ride-hailing service Ola and budget hotel operator Oyo Rooms today use Razorpay’s payments processing service. The two founders said they want RazorPay to be the financial cloud for businesses.

In recent years, the company has launched lending and a range of other services. Together with neo-banking services, Razorpay’s Kumar said he expects to have these generate 40 to 45% of revenue.

Razorpay today competes with a handful of companies including Naspers-owned PayU and legacy firms such as BillDesk. The startup, which focused on payments for the first two and a half years, says that business has grown by 600-700% year-over-year.

“We crossed a billion dollar in payments processing in September 2017. Now we are doing 10 billion,” Mathur said. “Our goal with today’s announcements is to have 20 to 30% of our merchants join and use our current account platform.”