Visa funds $40M for no-password crypto vault Anchorage

Visa and Andreessen Horowitz are betting even bigger on cryptocurrency, funding a big round for fellow Facebook Libra Association member Anchorage’s omnimetric blockchain security system. Instead of using passwords that can be stolen, Anchorage requires cryptocurrency withdrawals to be approved by a client’s other employees. Then the company uses both human and AI review of biometrics and more to validate transactions before they’re executed, while offering end-to-end insurance coverage.

This new-age approach to cryptocurrency protection has attracted a $40 million Series B for Anchorage led by Blockchain Capital and joined by Visa and Andreessen Horowitz. The round adds to Anchorage’s $17 million Series A that Andreessen led just six months ago, demonstrating extraordinary momentum for the security startup.

As a custodian, our work is focused on building financial plumbing that other companies depend on for their operations to run smoothly. In this regard we have always looked at Visa as a model” Anchorage co-founder and president Diogo Mónica tells me.

“Visa was ‘fintech’ before the term existed, and has always been on the vanguard of financial infrastructure. Visa’s investment in Anchorage is helpful not only to our company but to our industry, as a validation of the entire ecosystem and a recognition that crypto will play a key role in the future of global finance.”

Anchorage Crypto 1

Cold-storage, where assets are held in computers not connected to the Internet, has become a popular method of securing Bitcoin, Ether, and other tokens. But the problem is that this can prevent owners from participating in governance of certain cryptocurrency where votes are based on their holdings, or earning dividends. Anchorage tells me it’s purposefully designed to permit this kind of participation, helping clients to get the most out of their assets like capturing returns from staking and inflation, or joining in on-chain governance.

As 3 of the 28 founding members of the Libra Association that will govern the new Facebook-incubated cryptocurrency; Anchorage, Visa, and Andreessen Horowitz will be responsible for ensuring the stablecoin stays secure. While Facebook is building its own custodial wallet called Calibra for users, other Association members and companies hoping to dive into the ecosystem will need ways to protect their Libra stockpiles.

“Libra is exactly the kind of asset that Anchorage was created to hold” Mónica wrote the day Libra was revealed. “Our custody solution , so that asset-holders don’t face a trade-off between security and usability.” The company believes that custodians shouldn’t dictate what coins their clients hold, so it’s working to support all types of digital assets. Anchorage tells me that will include support for securing Libra in the future.

Libra Association Founding Partners

You’ve probably already used technology secured by Anchorage’s founders, who engineered Docker’s containers that are used by Microsoft, and Square’s first encrypted card reader. Mónica was at Square when he met his future Anchorage co-founder Nathan McCauley who’d been working on anti-reverse engineering tech for the U.S. military. When a company that had lost the password to a $1 million cryptocurrency account asked for their help with security, they recognized a recognized the need for a more idiot-proof take on asset protection.

“Anchorage applies the best of modern security engineering for a more advanced approach: we generate and store private keys in secure hardware so they are never exposed at any point in their life cycle, and we eliminate human operations that expose assets to risk” Mónica says. The startup competes with other crypto custody firms like Bitgo, Ledger, Coinbase, and Gemini.

Anchorage CryptocurrencyLast time we spoke, Anchorage was cagey about what I could reveal regarding how its transaction validation system worked. With the new funding, it’s feeling a little more secure about its market position and was willing to share more.

Anchorage ditches usernames, passwords, email addresses, and phone numbers completely. That way a hacker can’t just dump your coins into their account by stealing your private key or SIM-porting your number to their phone. Instead, clients whitelist devices held by their employees, who use the Anchorage app to submit transactions. You’d propose selling $10 million worth of Bitcoin or transferring it to someone else as payment, and a minimum of two-thirds of your designated co-workers would need to concur to form a quorum that approves the transfer.

But first, Anchorage would’s artificial intelligence and human staff would check for any suspicious signals that might indicate a hack in progress. It uses behavioral analysis (do you act like a real human and similar to how you have before), biometric signals (do you look like you), and network signals (is your device what and where it should be) to confirm the transaction is legitimate. The same process goes down if you try to add a new whitelisted device or change who has permission to do what.

The challenge will be scaling security to an ever-broadening range of digital assets, each with their own blockchain quirks and complex smart contracts. Even if Anchorage keeps coins safely in custody, those variables could expose assets to risk while in transit. Now with deeper pockets and the Visa vote of confidence, Anchorage could solve those problems as clients line up.

While most blockchain attention has focused on the cryptocurrencies themselves and the exchanges where you can buy and sell them, a second order of critical infrastructure startups is emerging. Companies like Anchorage could make Bitcoin, Ether, Libra, and more not just objects of speculation or the domain of experts, but safely functioning elements of the new world economy.

The rise of the new crypto “mafias”

In the early 2000s, journalists popularized the term “PayPal mafia” to describe the PayPal founders and employees who left to start their own wildly successful tech companies, including Peter Thiel, Reid Hoffman, and Elon Musk. Drawing from that idea, this article seeks to cover the formation and flow of talent within the crypto landscape today.

The crypto world is in a constant state of flux, with new startups entrants joining the industry every single day. These new startups have the potential either to be superstars within a portfolio company or to start the next Coinbase. Additionally, there are already impressive spin-outs from some of the more established crypto companies.

For ease of framing, I’ve separated these early-forming mafias into four categories: CryptoTechWall Street, and Academia. Since 2009, there have been 186 spinout companies originating from those four categories (33% from Academia, 28% from Crypto, 24% from Tech, and 15% from Wall Street).

crypto mafias

Obvious but important disclaimer: this article does not intend to promote organized crime within crypto.

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Razer goes big on payments with Visa prepaid card

The latest pairing between a tech upstart and a financial titan is a digital prepaid card targeted at Southeast Asia’s 430 million-plus unbanked and underserved population.

On Monday, Razer, the Singapore-based company best known for its gaming laptops and peripherals, announced a partnership with Visa to develop a Visa prepaid solution. The service, which allows unbanked users to top up and cash out easily, will be available as a mini program embedded in Razer Pay, the gaming company’s mobile payments app. That means Razer’s 60 million registered users will be able to pay at any of the 54 million merchant locations around the world that take Visa.

Going virtual is the natural step given the region’s fast-growing digital population, but the pair does not rule out the possibility to introduce a physical prepaid card down the road, Razer’s chief strategy officer Li Meng Lee told TechCrunch over a phone interview.

Both parties have something to gain from this marriage. Hong Kong-listed Razer has in recent years been doubling down on fintech to prove it’s more than a hardware company. Payment services seem like an inevitable development for Razer whose users in the region are accustomed to buying in-game credits at convenience stores.

“For many years, the people who have been making digital payments before it became a sexy word in the last couple of years… [many of them] are the gamers who go to a 7-Eleven, pay in cash, and get a pin code to buy virtual skins for the games,” noted Lee. “Because of that, we’ve been able to build up more than a million service points across Southeast Asia.”

The key differentiator of Razer’s prepaid service, Lee said, is that customers paying at Visa merchants don’t have to already own a bank account, whereas that prerequisite is common for many other e-wallet services.

The Razer Pay app is handling transactions for a slew of internet services like Lazada and Grab and has made a big offline push, boasting a network of more than one million touchpoints through retailers including 7-Eleven and Starbucks where it’s accepted.

All in all, Razer Pay claimed it processed over $1.4 billion in payment value last year. It first launched in Malaysia in mid-2018 and recently branched into Singapore as its second market. Lee said the service plans to roll out in the rest of Southeast Asia soon, upon which the Visa prepaid mini app will also be available in those markets.

For Visa, the tie-up with an internet firm could be a potential boost to its reach in the mobile-first Southeast Asia where some 213 million millennials and youths live.

“This is a great opportunity for us to be working with Razer in addressing how we work to bring the unbanked and underserved population into the financial system,” Chris Clark, Visa’s regional president for the Asia Pacific, told TechCrunch. “We will be doing some work with Razer on financial literacy and financial planning to bring that education to the population across the region.”

Razer’s fintech ambition has been evident since it announced to gobble up MOL, a company that offers online and offline payments in Southeast Asia, in April 2018. Besides payments, Lee said other microfinance services such as lending and insurance are also on the cards as part of an effort to ramp up user stickiness for Razer’s fintech arm.

Optimizely raises $50M Series D round for its experimentation platform

Optimizely, a platform that offers tools for A/B testing and personalization on the web and in mobile apps, today announced that it has raised a total of $105 million. This includes a $50 million Series D round led by Goldman Sachs Private Captial, with the participation of Accenture Ventures, as well as $55 million line of credit from Bridge Bank.

Goldman Sachs’s Michael Kondoleon will join Optimizely’s Board of Directors as a board member.

“We’re excited to reach this milestone because these investments cement our leadership position in the market,” Optimizely CEO Jay Larson told me. “We can invest more in products to put an even bigger gap between Optimizely and our competition. We can expand geographically. And we will continue to grow our team of world-class digital optimization experts. This is a big day for Optimizely and a big day for the experimentation and personalization industry.”

The company notes that about a quarter of the Fortune 100 currently uses its services. the company says it now handles over 6 billion events a day and that its customers have tripled their investments in digital experience optimization in the last two years. Current customers include the likes of Gap, Visa, IBM, StubHub, Metromile, Lending Club and Sonos.

In total, Optimizely has now raised more than $200 million, excluding the line of credit. The additional $55 million from Bridge Bank are a bit unusual, but not completely out of the ordinary for companies at this stage. “Bridge Bank is proud to continue working with Optimizely, a global leader at the forefront of the digital experience optimization market,” said Mike Lederman, senior vice president and western region director of Bridge Bank’s technology banking group. “Optimizely is on a path of substantial growth and the additional capital will help them continue to build market-leading products that are used by an increasing number of top global brands.”

As is pretty much standard for companies at this stage, Optimizely will use the new funding to drive growth.

Line teams up with Visa to boost its mobile payment service

Messaging app Line has partnered with Visa to bring traditional financial clout to its mobile payment service.

The deal will see Line Pay become compatible with Visa’s 54 million merchant partner locations worldwide, boosting the service outside of its native Japan, where it has been pitched heaviest so far and where Line claims 80 million users.

The tie-up will allow Line users to use the app’s payment system even where Line Pay isn’t accepted. That’s through a ‘virtual’ visa card that’ll show up in the chat app.

Beyond that, the two sides said they will explore “ways for merchants to interact with the Line Pay service” and its digital wallet. That’s pretty lukewarm, and it’s hard to imagine that it’ll make much of a dent outside of Japan. Line’s three other major markets, in terms of users, are in Asia: Thailand (44 million), Taiwan (21 million) and Indonesia (19 million.)

One intriguing element of the deal involves blockchain, which Line has jumped into with its own crypto token (Link) and a blockchain investment arm. Line said it’ll work with Visa around “new experiences based on blockchain” that could include international money transfers among other things.

Finally, as is often the case with Japanese tech deals, there’s also an Olympics focus — with Tokyo scheduled to host the summer games in 2020.

Mobile payments are one of the Japanese government’s big focuses ahead of the games — organizing its taxis through tech, is another — and, thus, Visa and Line said they plan to heavily promote their ‘cashless’ alliance ahead of 2020.

Line and Visa are far from the first to combine traditional and new payments. Paytm and Uber rival Ola in India have both launched cards in partnership with banks, while cross-border payment companies like TransferWise, Monzo and others have tie-ups with Visa and Mastercard to enable spending.

These startups are locating in SF and Africa to win in global fintech

To become a global fintech player, locate your company in San Francisco and Africa.

That’s the approach of payments company Flutterwave, digital lending startup Mines, and mobile-money venture Chipper Cash—Africa-founded ventures that maintain headquarters in San Francisco and operations in Africa to tap the best of both worlds in VC, developers, clients, and the frontier of digital finance.

This arrangement wasn’t exactly coordinated across the ventures, but TechCrunch coverage picked up the trend and some common motives among these rising fintech firms.

Founded in 2016 by Nigerians Iyinoluwa Aboyeji and Olugbenga Agboola, Flutterwave has positioned itself as a global B2B payments solutions platform for companies in Africa to pay other companies on the continent and abroad.

Clients can tap its APIs and work with Flutterwave developers to customize payments applications. Existing customers include Uber,  Facebook,  Booking.com and African e-commerce unicorn Jumia.com.

The Y-Combinator backed company is headquartered in San Francisco, runs its operations center in Nigeria, and plans to add offices in South Africa and Cameroon.

Flutterwave opened an office in Uganda in June and raised a $10 million Series A round in October. The company also plugged into ledger activity in 2018, becoming a payment processing partner to the Ripple and Stellar blockchain networks.

India’s ride-hailing firm Ola is now in the credit card business, too

A day after India’s largest wallet app Paytm entered the credit cards business, local ride-hailing giant is following suit. Ola has inked a deal with state-run SBI bank and Visa to issue as many as 10 million credit cards in next three and a half years, it said today.

The move will help Visa and SBI bank acquire more customers in India, where most transactions are still bandied out over cash. For Ola, which rivals Uber in India, foray into cards business represents a new avenue to monetize its customers, as TechCrunch previously reported.

With about 150 million users availing more than 2 million rides on its platform each day, Ola is sitting on a mountain of data about its users’ financial power and spends. With the card, dubbed Ola Money-SBI Credit Card, the mobility firm is also offering several discounts and savings to retain its loyal customer base.

Ola, which is nearing $6 billion in valuation and counts SoftBank and Naspers among its investors, said it will offer its credit card holders “highest cashback and rewards” in form of Ola Money that could be redeemed for Ola rides, and flight and hotel bookings. There will be seven percent cashback on cab spends, five percent on flight bookings, 20 percent on domestic hotel bookings (six percent on international hotel bookings), 20 percent on over 6,000 restaurants, and one percent on all other spends.

“Mobility spends form a significant wallet share for users and we see a huge opportunity to transform their payments experience with this solution. With over 150 million digital-first consumers on our platform, Ola will be a catalyst in driving India’s digital economy with cutting edge payment solutions,” Bhavish Aggarwal, cofounder and CEO of Ola, said in a statement.

Why credit cards?

Ola appears to be following the playbook of Grab and Go-Jek, two ride-hailing services in Southeast Asian markets that have ventured into a number of businesses in recent years. Both Grab and Go-Jek offer loans, remittance and insurance to their riders, while the former also maintains its own virtual credit card. Interestingly, Uber, which also offers a credit card in some markets, has no such play in India.

The move will allow Ola to look beyond ride-hailing and food delivery, two businesses that appear to have hit a saturation point in India, said Satish Meena, an analyst with research firm Forrester.

In recent years, Ola has started to explore financial services. It offers riders “micro-insurance” that covers a range of risks including loss of baggage and medical expenses. The company said earlier this year, it has sold over 20 million insurances to customers. Using Ola Money to facilitate cashbacks also underscores Ola’s push to increase the adoption of its mobile wallet, which according to estimates, lags Paytm and several other wallet and UPI payment apps.

The company has also made major push in electric vehicles business, which it spun off as a separate company earlier this year. In March, its EV business raised $300 million from Hyundai and Kia. The company has said that it plans to offer one million EVs by 2022. Its other EV programs include a pledge to add 10,000 rickshaws for use in cities.

Partnering with Visa, emerging market lender Branch International raises $170 million

The San Francisco-based startup Branch International, which makes small personal loans in emerging markets, has raised $170 million and announced a partnership with Visa to offer virtual, pre-paid debit cards to Branch client networks in Africa, South-Asia and Latin America. 

Branch — which has 150 employees in San Francisco, Lagos, Nairobi, Mexico City and Mumbai — makes loans starting at $2 to individuals in emerging and frontier markets. The company also uses an algorithmic model to determine credit worthiness, build credit profiles and offer liquidity via mobile phones.

“We’ll use [the money] to deepen existing business in Africa. Later this year we’ll announce high-yield savings accounts…in Africa,” says Branch co-founder and chief executive Matt Flannery.

The $170 million round from Foundation Capital and its new debit card partner, Visa, will support Branch’s international expansion, which could include Brazil and Indonesia, according to Flannery. Branch launched in Mexico and India within the last year. In Africa, it offers its services in Kenya, Nigeria and Tanzania.

A potential Branch customer

The Branch-Visa partnership will allow individuals to obtain virtual Visa accounts with which to create accounts on Branch’s app. This gives Branch larger reach in countries such as Nigeria — Africa’s most populous country with 190 million people — where cards have factored more prominently than mobile money in connecting unbanked and underbanked populations to finance.

Founded in 2015, Branch started operating in Kenya, where mobile money payment products such as Safaricom’s M-Pesa (which does not require a card or bank account to use) have scaled significantly. M-Pesa now has 25 million users, according to sector stats released by the Communications Authority of Kenya. Branch has more than 3 million customers and has processed 13 million loans and disbursed more than $350 million, according to company stats.

Branch has one of the most downloaded fintech apps in Africa, per Google Play app numbers combined for Nigeria and Kenya, according to Flannery.

Already profitable, Branch International expects to reach $100 million in revenues this year, with roughly 70 percent of that generated in Africa, according to Flannery.

In addition to Visa and Foundation Capital, the $170 Series C round included participation from Branch’s existing investors Andreessen Horowitz, Trinity Ventures, Formation 8, the IFC, CreditEase and Victory Park, while adding new investors Greenspring, Foxhaven and B Capital.

Branch last raised $70 million in 2018. The company’s overall VC haul and $100 million revenue peg register as pretty big numbers for a startup focused primarily on Africa. Pan-African e-commerce startup Jumia, which also announced its NYSE IPO last month, generated $140 million in revenue (without profitability) in 2018.

Startups building financial technologies for Africa’s 1.2 billion population have gained the attention of investors. As a sector, fintech (or financial inclusion) attracted 50 percent of the estimated $1.1 billion funding to African startups in 2018, according to Partech.

Branch’s recent round and plans to add countries internationally also tracks a trend of fintech-related products growing in Africa, then expanding outward. This includes M-Pesa, which generated big numbers in Kenya before operating in 10 countries around the world. Nigerian payments startup Paga announced its pending expansion in Asia and Mexico late last year. And payment services such as Kenya’s SimbaPay have also connected to global networks like China’s WeChat.

Singapore fintech startup Instarem closes $41M Series C for global growth

Singapore’s Instarem, a fintech startup that helps banks and consumers send money overseas at lower cost, has closed a $41 million Series C financing round to go after global expansion opportunities.

The four-year-old company announced a first close of $20 million last November, and it has now doubled that tally (and a little extra) thanks to an additional capital injection led by Vertex Ventures’ global growth fund and South Korea’ Atinum Investment. Crypto company Ripple, which has partnered with Instarem for its xRapid product, also took part in the round, Instarem CEO Prajit Nanu confirmed to TechCrunch, although he declined to reveal the precise amount invested. More broadly, the round means that Instarem has now raised $59.5 million from investors to date.

The company specializes in moving money between countries in Asia in a similar way to TransferWise although, unlike TransferWise, its focus is on banks as customers rather than purely consumers. Today, it covers 50 countries and it has offices in Singapore, Mumbai, Lithuania, London and Seattle.

Instarem said it plans to spend the money on expansion into Latin America, where it will open a regional office, and double down on Asia by going after money licenses in countries like Japan and Indonesia. The company is also on the cusp of adding prepaid debit card capabilities, which will allow it to issue cards to consumers in 25 countries and more widely offer the option to its banking customers. That’s thanks to a deal with Visa .

Further down the line, the company continues to focus on an exit via IPO in 2021. That’s been a consistent talking point for Nanu, who has been fairly outspoken on his desire to take the company public. That’s included shunning acquisition offers. As TechCrunch revealed last year, Instarem declined a buyout offer from one of Southeast Asia’s tech unicorns. Commenting on the offer, Nanu said it simply “wasn’t the right timing for us.”

Visa and Mastercard could raise interchange fees

According to a report from the WSJ, Visa and Mastercard are considering raising interchange fees on card transactions in the U.S. Visa and Mastercard generate most of their revenue from these small processing fees, and it could have implications for merchants and fintech startups.

When you pay with a credit or debit card, merchants pay a small fee to the bank that issued this card. Your bank then pays an even smaller fee to the company that operates the card network.

In most cases, card issuers and card networks are separate companies. For instance, Chase issues a Visa card, Chase gets an interchange fee on every card transaction, and Chase pays a tiny fee to Visa. Some companies also operate a network and issue cards themselves, such as American Express.

The WSJ says that Mastercard and Visa will raise their fees in April — Visa confirmed the change. While fees on each transaction are nearly unnoticeable, they add up quite rapidly. They generate a ton of revenue for Visa and Mastercard, and they represent significant costs for large merchants.

It could become a consumer protection issue as customers often end up paying higher prices because of those fees. While Visa and Mastercard mostly negotiate with financial institutions, those financial institutions still want a cut on interchange fees. That’s why those fees are passed on to the merchants.

Merchants take into account the fact that a large portion of their customers are going to pay with a card. They end up raising prices for everyone, even if you pay using cash, a debit card or a credit card.

Fees on credit cards are generally higher and are the reason why points and rewards exist. Banks attract customers with advantageous reward systems because they want to get your interchange fees. Interchange fees are also much higher in the U.S. than in Europe because there has been more fraudulent activity — the U.S. has switched to chip-and-pin cards years after Europe.

An increase in interchange fees could also affect consumer fintech startups. Many challenger banks have been relying on interchange fees as one of their revenue streams. That’s part of the reason why European fintech startups, such as N26, Monzo and Revolut, have been looking at the U.S. as a potential market. There’s an entire industry built on top of those interchange fees.