💰 PayPal’s super app plan


February 18, 2021

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Rupert Murdoch’s News Corp. and Google have reached an agreement for the search giant to pay for news.

Meanwhile, Facebook will no longer allow Australians to share or view news stories, as part of an ongoing beef with the country’s regulators wanting it (and Google) to pay for content o.

In sum: you should keep reading The Hustle, which is free and not banned by Zucky McBigBucks.

The Big Idea
PayPal logo

PayPal wants to build a super app. It has crazy competition.

While the rocket emojis came out for Bitcoin breaking $50k, there was another recent money milestone that met with little fanfare: the market cap of PayPal passed Mastercard.

Now valued at $340B+, PayPal has seen its market value quadruple since March 2020 lows.

Its surge has been driven by a user base that grew ~25% in 2020, to 377m (along with 30m merchants), powered by the pandemic forcing commerce online and the unveiling of crypto-trading services.

Now, PayPal wants to create a super app

The company’s CEO, Dan Schulman, laid out his plan during an investor day presentation.

As reported by Protocol, Schulman notes that most consumers only
“want 8 to 10 apps.” With meme-making tools making up half of them, there’s an appetite for one app covering all your financial needs.

PayPal plans to focus on payments, shopping, and financial services (checking, savings, investment, crypto, rewards) with these benefits:

  • AI-powered money management: With all your data in one place, PayPal can help you make budgeting and investing decisions
  • ‘Contextual Commerce’: With a purchase track record, PayPal can partner with merchants to give personalized offers and deals

There’s serious competition, though 

In a follow-up piece, Protocol gives a rundown of the fintech super app playing field:

  • Apple has a massive installed hardware base (iPhone, Watch) used to making in-store payments with a tap
  • Google just re-launched its Google Pay app, also with the intention of being a super app (with benefit of pulling receipt data from Gmail)
  • Square is a smaller $110B super app competitor in its own right
  • Shopping apps — Affirm, Amazon, Klarna, Shopify — are well-known brands that have tons of data and consumer cards out there
  • Non-tech firms: Old banks (e.g., Goldman Sachs) and challenger banks (e.g., Chima, Varo) with mobile-first products are growing with younger demographics

While PayPal passing poor Mastercard is definitely a milestone, we can’t pull out the rocket emojis for its super app just yet.

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Snippets
  • Yesterday, we wrote about Big Tech vs. North Dakota… namely, a recent state senate bill trying to rein in Apple and Google’s app store dominance. We forgot to update that the bill was voted down. Trung’s Our bad.
  • Meanwhile, Epic Games is expanding its app store antitrust beef with Apple into Europe.
  • Prime Suspect: New York’s attorney general filed a lawsuit against Amazon for failing to adequately protect its workers during the pandemic. Interestingly enough, Amazon has spent $11.5B on COVID-related costs.
  • $4.3B for bottled water: That’s the price tag Nestle put on its American water brands, which it agreed to sell to a group of private equity firms in an effort to focus on its — get this — premium water lineup.
  • Podcast battles: iHeartMedia agreed to acquire Triton, an audio ad analytics startup for $230m. It’s the latest salvo in big companies — Apple, Amazon, Spotify, Sirius — pumping money into podcasts (we wrote more here).
  • Trading app Public raised $220m and is officially a unicorn. The fundraise comes as one of its main competitors (Robinhood) faces backlash for its role in the GameStop saga. (Read our interview with a Public co-CEO here).
New Renewable
Eavor

Eavor looks to (literally) heat up the renewable race with $40m investment

You know you’re doing something right when the world’s largest oil producers are investing in your renewable energy project.

Earlier this week, geothermal startup Eavor announced a $40m funding round led by Chevron and BP.

The new investment will help scale Eavor’s operations

The company is on a quest to power 10m homes by 2030 with its unique Eavor-Loop IP.

Instead of using pumps and wells to produce super hot liquid underground, Eavor uses a self-contained loop that circulates fluid through natural heating and cooling, kinda like how a car radiator cools an engine.

One Eavor-Loop system can produce enough heat for 16k homes, and the new investment will help lower the price.

The broader geothermal space is heating up

In the first half of 2020, global geothermal investments totaled $675m, 6x more than the 2019 total.

In Iceland, 9 in 10 homes are heated with geothermal energy, and the country is helping China develop more geothermal heating systems than anywhere else.

The US already produces 3.7 gigawatts of geothermal electricity, enough to power 1m homes. By 2050, America could see its geothermal output increase 26x, providing 8.5% of the country’s electricity and heating for 28m households.

The most gangster player in the geothermal game: Boise, Idaho. Since 1983, the city’s heated its downtown with America’s largest geothermal heating system at a pump cost of just $1k a month.

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SPONSORED

Here’s how to hedge against the crazy volatility of the stock market 

Real estate.

(Yes, it is that simple.)

When it comes to risk-reducing alternative investments, real estate is historically one of the best options because…

  1. It has historically beaten the stock market over the last 30 years
  2. It doesn’t let Reddit control it’s future

Unfortunately, it’s also one of the markets that’s largely inaccessible to anyone who’s not the “my pet horse has its own pet horse” type of rich.

Until now.

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Congressional Hearing
GameStop stock

What’s going on with GameStop?

Well, if you’re somehow completely new to the GameStop story, read this.

The video game retailer — which became the battleground for investors (from r/WallStreetBets day traders to hedge funds) — has seen its stock price plummet from a high of $483 down to $46 in a few weeks.

Congress has questions

And, tomorrow at 12pm EST, the US House Committee will hold a livestream hearing with many of the players involved, including:

  • Vlad Tenev: The embattled CEO of trading app Robinhood
  • Ken Griffin: The “richest person in Illinois” and CEO of market making firm Citadel
  • Gabriel Plotkin: The CEO of Melvin Capital, the hedge fund that was shorting $GME and took a beating from Reddit traders
  • Steve Huffman: CEO of Reddit, who has said that his moderation team looks for “daily active sh*theads” to make sure no communities “spiral out of control”
  • Keith Gill: A Massachusetts-based financial advisor who was the most prominent Reddit trader (with the username u/DeepF*****Value). Gill turned a $50k bet on $GME into tens of millions of dollars.

Separately, Gill was hit with a lawsuit for securities fraud in Massachusetts on Tuesday. The charge: that he misrepresented himself as an amateur (when, in fact, he was a chartered financial analyst) while touting $GME.

The purpose of the hearing…

… is to talk about the “recent market volatility involving GameStop stock and other stocks” and — per Investopedia — will touch on these topics:

  • Robinhoods business model: The trading app has been accused of gamifying stock trading. Further, the company makes significant revenue from what is known as “payment for order flow,” where it gets paid to send trades to market makers like Citadel.
  • Hedge fund short selling: Whether the practice of betting against stocks is abusive.

Absent from the hearing… anyone from the actual company GameStop because… it’s 2021, and meme stocks are often not even about the company.

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How a back-office mistake cost Citi $500m

This is a wild story befitting bullet points:

  • In 2016, Citi helped cosmetics company Revlon borrow $1.8B
  • As Revlon’s loan agent, it was Citi’s job to collect and distribute payments
  • During one repayment period, Citi was supposed to send $8m in interest payments but ended up sending out $900m (which includes principal payments)
  • This was a problem because Revlon itself was actually struggling and reorganizing its debt structure (and only intended for the interest payments to go out)
  • Some of the lenders were surprised at receiving the full amount and a few returned the funds
  • $500m remained outstanding and Citi filed a lawsuit to get the money back
  • A judge has ruled that Citi can not get the $500m back, citing the discharge-for-value-defense, which states: “If the beneficiary is entitled to the money and did not know it was accidentally wired, they can keep it.”

Bloomberg’s Matt Levine says the original mistake was due to a complex user interface design.

In the image below, you’ll see Citi’s repayment prompt. To prevent the payment of principal, you have to click 3 boxes — “Front”, “Fund”, and “Principal”.

Confusingly, only one of those words is “Principal”… and the employee forgot to click the other boxes (circled in red). Yikes!

This gives a new meaning to “fat finger” (Source: US Southern District Court of NY)

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Cake of the day

(u/KurisuHippo via Reddit)

If you ever wondered what a custom GameStop cake might look like, a r/WallStreetBets member posted this b-day cake he received… in one word: LOL.

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