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To: The Ox who wrote (159)2/28/2021 10:11:33 PM
From: The Ox
1 Recommendation   of 178
Why Is No One Talking About LendingClub Stock?

Once a hot IPO, LendingClub fell from grace. Hard. But a turnaround could be in the offing.
Billy Duberstein (TMFStoneOak) Feb 28, 2021 at 8:15AM

It's been a difficult six years for LendingClub ( NYSE:LC) as a public company. After coming to market in late 2014 as a new-age fintech platform at a $5.4 billion valuation, the company has since plunged to just a fraction of that, with a current market cap of only $850 million.

So, what happened to LendingClub? Things started going wrong in 2016, when its founder and former CEO, along with some executives, were caught doctoring some details on loan requirements in order to move more loans through its platform. LendingClub had set itself up as a peer-to-peer lender, with retail investors buying high-yield loans from borrowers. LendingCLub acted as a scaled "marketplace," offering investors diversified pools of parts of loans, while borrowers could get personal loans at lower rates than credit cards, since LendngClub didn't have any brick-and-mortar infrastructure.

The thing was, LendingClub was dependent on volume, and it seems the founder cut corners in pursuing growth. Not only that, but LendingClub's loans started to experience increased chargeoffs in 2016 as the economy slowed.

The stock has never recovered from the fallout, as the company was caught up in costly lawsuits and a business model retrenching ever since. New CEO Scott Sanborn has been transforming the business over the past few years, which may have soured the original investors in LendingClub, without attracting more traditional financial stock investors.

However, I think better days are ahead for LendingClub, which just closed a potentially transformative acquisition just on February 1 and could be on the brink of a big turnaround.


LendingClub was turning the corner prior to COVIDThings were actually looking pretty positive for LendingClub and its turnaround just before COVID hit. After the 2016 scandal, LendingClub slowed originations, and aimed more at prime borrowers with tightened underwriting. In addition, LendingClub sought out more stable institutional investors, such as banks, insurance companies, and other professional funds. This has helped stabilized the funding side of the platform, as these institutions are fine with lower yields in exchange for safer investments. They are also much less "flighty" than individual retail investors lured in by high yields. And the company has also innovated more products, including liquid, tradable securities made up of LendingClub loans on several different platforms, opening its loans up to more types of investors.

That slowed down LendingClub's growth, but was likely necessary. Any company involved in lending is always tempted to boost growth in the near-term, but making too many bad loans can come back to bite you in the long-term, as LendingClub painfully learned.

Still, LendingClub did, prudently and methodically, increase originations between 2017 and 2019, from $9 billion in originations in 2017 to $12.3 billion in 2019. Margins also increased, due to both scale and management efforts to cut costs. The company even reach adjusted net income profitability for the first time in years in the third quarter of 2019. Even after it slowed down originations, LendingClub was still the largest originator of personal loans in the U.S.

Covid-19 cons and prosFor sure, the COVID-19 downturn wasn't great for any financial company. At the onset of the pandemic, the company immediately pulled back on lending, cutting originations by 87% quarter-over-quarter in Q2, then slowly increasing in Q3, with another expected increase in Q4. Still, originations and revenues will still be down a lot from the prior year. Obviously, LendingClub's adjusted net margins went negative this year once again.

However, there are some silver linings. The company has continued to cut costs, and its loans made pre-pandemic are holding up well. LendingClub expects that pre-COVID loan vintages are still averaging 4% returns, which is not too far below their original expected return. And post-COVID loans are forecast to return between 5%-6%. Investors are also returning to the platform after a justified hiatus after COVID broke out, increasing loan buys in Q3 and Q4.

One of the fears around LendingClub was how its loans would hold up in a financial downturn. So far, so good.

Radius could be a game-changerLendingClub's stock is just making its way back to pre-COVID levels, but the recent closing of the Radius Bank acquisition on February 1 could change the story. Radius is a digital-only bank headquartered in Boston. At the time of the announced acquisition just before COVID, Radius had $1.4 billion in assets and $1.2 billion in deposits.

At first glance, it appears that LendingClub paid a somewhat expensive price for Radius, buying it for $185 million, equal to 1.72 times book value and 28.6 times 2019 earnings. However, that's only the beginning of the story.

LendingClub is also set to reap some $40 million in annual cost synergies from the deal, including lower regulatory costs (from having an in-house bank), as well as lower funding costs from deposits. Remember, LendingClub wasn't a bank prior to this, and had to fund a lot of its loans in the short-term with higher-cost warehouse lines.

Not only will the company reap those cost synergies, but LendingClub will also be able to hold more loans on its balance sheet against its deposits, keeping the extra economics for itself. Of course, LendingClub will still be a marketplace, but the ability to hold more loans itself if need be will take care of the funding vulnerability in rough times, and should lead to an extra $40 million in profit for every $1 billion held on its books.

If you add that on, that's potentially an additional $80 million pre-tax income LendingClub can make as a result of the acquisition. If these benefits are achieved, LendingClub is really only paying two times pre-tax earnings for Radius. Quite a steal!

Call it a comeback?As the economy recovers from COVID, there's a pretty good shot that we could enter a strong period of GDP growth, which should benefit financial stocks. When you consider LendingClub's stock is still quite depressed from several years ago, even while the business has been transformed with a much better cost structure coming out of the crisis, and LendingClub looks like a compelling turnaround story for value investors to explore. The company reports fourth quarter results on March 10.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Billy Duberstein owns shares of LendingClub. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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From: Glenn Petersen3/2/2021 6:47:06 AM
2 Recommendations   of 178
Square’s bank arm launches as fintech aims ‘to operate more nimbly’

Mary Ann Azevedo 19 hours
March 1, 2021

Known for its innovations in the payments sector, Square is now officially a bank.

Nearly one year after receiving conditional approval, Square said Monday afternoon that its industrial bank, Square Financial Services, has begun operations. Square Financial Services completed the charter approval process with the FDIC and Utah Department of Financial Institutions, meaning it’s ready for business.

The bank, which is headquartered in Salt Lake City, Utah, will offer business loan and deposit products, starting with underwriting, and originating business loans for Square Capital’s existing lending product.

Historically, Square has been known for its card reader and point-of-sale payment system, used largely by small businesses — but it has also begun facilitating credit for the entrepreneurs and smalls businesses that have used its products in recent years.

Moving forward, Square said its bank will be the “primary provider of financing for Square sellers across the U.S.”

In a statement, Square CFO and executive chairman for Square Financial Services Amrita Ahuja said that bringing banking capability in house will allow the fintech to “operate more nimbly.”

Square Financial Services will continue to sell loans to third-party investors and limit balance sheet exposure. The company said it does not expect the bank to have a material impact on its consolidated balance sheet, total net revenue, gross profit or adjusted EBITDA in 2021.

Opening the bank “deepens Square’s unique ability to expand access to loans and banking tools to underserved populations,” the company said.

Lewis Goodwin had been tapped to serve as the bank’s CEO, and Brandon Soto its CFO. With today’s announcement, Square also announced the following new appointments:

Sharad Bhasker, Chief Risk Officer
Samantha Ku, Chief Operating Officer
Homam Maalouf, Chief Credit Officer
David Grodsky, Chief Compliance Officer
Jessica Jiang, Capital Markets and Investor Relations
The fast-growing company, which sells a credit card tailored for startups, with Emigrant Bank currently acting as the issuer, said that it had submitted an application with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions (UDFI) to establish Brex Bank.

A number of fintech companies, or those with fintech services, have spun up products typically offered by banks, including deposit and checking accounts as well as credit offerings. Often, these are designed to provide capital to customers who might not be able to get funding on favorable terms from traditional banking institutions, but who might qualify for business-building loans from a provider who knows their company, like Square, inside and out.

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From: DJK13/5/2021 9:56:47 AM
   of 178
Timios Announces Expansion of Its Retail Purchasing Business

Timios is a Fintech PropTech positive cash flow asset (100%) of Ideanomics Inc.

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From: Glenn Petersen3/14/2021 8:38:20 PM
   of 178
Stripe closes $600M round at a $95B valuation

Ingrid Lunden @ingridlunden
4:59 PM CDT•March 14, 2021

On the heels of reports that Stripe was raising yet more money, the payments giant has now confirmed the details. The company has closed in on another $600 million, at a valuation of $95 billion.

Stripe said it will use the funding to expand its business in Europe, with a focus on its European HQ, and also to beef up its global payments and treasury network.

“We’re investing a ton more in Europe this year, particularly in Ireland,” said John Collison, President and co-founder of Stripe, in a statement. “Whether in fintech, mobility, retail or SaaS, the growth opportunity for the European digital economy is immense.”

Stripe said the financing included backing from two major insurance players. Allianz, via its Allianz X fund, and Axa are in the round, along with Baillie Gifford, Fidelity Management & Research Company, Sequoia Capital, and an investor from the founders’ home country, Ireland’s National Treasury Management Agency (NTMA).

The insurance angle may point to which direction the company is looking to go next. After all, fintech and insurance are closely aligned.

“Stripe is an accelerator of global economic growth and a leader in sustainable finance. We are convinced that, despite making great progress over the last 10 years, most of Stripe’s success is yet to come” said Conor O’Kelly, CEO of NTMA in a statement. “We’re delighted to back Ireland’s and Europe’s most prominent success story, and, in doing so, to help millions of other ambitious companies become more competitive in the global economy.”

The big round, rising valuation, and growing cap table will inevitably lead to questions around where the company is standing with regards to its next steps, and whether that will include a public listing. Stripe has long kept its cards to its chest when it comes to user numbers, revenues, and profit and those details, once again, are not being disclosed with the news today, and nor has it made any comments on IPO plans.

Notably, the confirmation of the news today is at a lower valuation than the valuation Stripe was reportedly trading at on the secondary market, which was $115 billion; and the round that closed at a $95 billion valuation was also rumored to be coming in at a higher number, over $100 billion.

It’s not clear whether those numbers were never accurate, or if Covid had an impact on pricing, or if European investors simply drove a hard bargain.

The focus on growing in Europe also puts the hiring of Peter Barron — the former EMEA VP of communications for Google and a former journalist — into some context.

Founded in 2010 by John and his brother Patrick Collison (the CEO), Stripe is one of a wave of commerce startups that saw the value of building a simple way for developers to integrate payments into any app or site by way of a few lines of code, at a time when digital and specifically online payments were starting to take off.

Behind that code, the company had done all the hard work of integrating all the different and complex pieces needed to make payments work both in countries and across borders. Over the years, the company has built out a bigger platform around that, a suite of services to position itself as a one-stop shop not just for helping businesses run all of the commercial aspects of their operations, including incorporation, managing fraud, managing cashflow and more.

Within that, Stripe has built out a decent footprint in Europe, with the region accounting for 31 of the 42 countries where it has customers today. While Stripe may have had its start and early traction providing payments infrastructure for startups (and especially small, new startups), today that list includes a lot of big names, too. In Europe, customers include Axel Springer, Jaguar Land Rover, Maersk, Metro, Mountain Warehouse and Waitrose, alongside Deliveroo (UK), Doctolib (France), Glofox (Ireland), Klarna (Sweden), ManoMano (France), N26 (Germany), UiPath (Romania) and Vinted (Lithuania).

Even with heavy competition in payments and adjacent services, there is a huge opportunity for more growth. Stripe says that in the wake of Covid and the rise of people shopping considerably more across the web and apps rather than in person, currently some 14% of commerce happens online, a big shift considering that just a year ago it was about 10%.

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To: The Ox who wrote (159)3/21/2021 4:27:59 PM
From: Glenn Petersen
1 Recommendation   of 178
FUSE has drifted down to $10.18.

MoneyLion investor presentation:

Phenomenal growth, with a broad range of services targeting the next generation of investors (or should I say speculators?). Also, it is not losing a ton of money. Probably a bit ahead of itself valuation-wise, but that comes with the territory with today's SPAC transactions. It will probably do well after the close of the transaction and get a sympathetic bounce when Robinhood goes public.

Another one to keep an eye on is the eToro/FTCV transaction.

Blank Check IPOs (SPACS) Message Board - Msg: 33243660 (

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From: Glenn Petersen3/23/2021 4:57:31 PM
   of 178
Robinhood Is Said to Have Filed Confidentially for U.S. IPO

By Matthew Monks and Katie Roof
March 23, 2021, 3:07 PM CDT

Robinhood Markets Inc., the popular trading app, has filed confidentially for an initial public offering with the U.S. Securities and Exchange Commission, according to people familiar with the matter.

Robinhood is moving forward with its IPO although its listing plans could change, said the people, who asked to not be identified because the matter isn’t public.

Bloomberg News previously reported that Robinhood was planning to file for an IPO this month. The company has selected Nasdaq as the venue for its listing, people familiar with the matter have said.

A representative for Robinhood, based in Menlo Park, California, declined to comment.

Robinhood became immensely popular during the coronavirus pandemic, particularly as homebound young people turned to online trading to pass the time and make money.

That increased popularity has led to scrutiny from politicians and regulators, who are focused on the so-called gamification of trading and the company’s role at the center of the meme-stock frenzy. Robinhood also had to raise billions of dollars from its backers to comply with a request from the industry’s clearinghouse.

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To: The Ox who wrote (160)3/28/2021 7:57:30 PM
From: Glenn Petersen
   of 178
A well laid out case on behalf of LendingClub. LC is up substantially since you posted that article.

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From: The Ox4/14/2021 4:36:01 PM
   of 178

Coinbase Valuation Closes at $86 billion. Alkami Has Solid First Day, Too.

Luisa Beltran

Updated April 14, 2021 4:19 pm ET / Original April 14, 2021 10:31 am ET

Coinbase is the largest U.S. cryptocurrency exchange, with 56 million verified users in the first quarter.Tiffany Hagler-Geard/Bloomberg

Coinbase Global lived up to the hype.

Shares of the cryptocurrency exchange rose nearly 32% Wednesday, valuing Coinbase at nearly $86 billion.

Alkami Technology, Wednesday’s other IPO, rose 43.33%.

Coinbase’s (ticker: COIN) stock opened at $381, peaked at $429.54 and then dropped. Shares closed at $328.28, up 78.28% from Coinbase’s $250 reference price. Nasdaq issued the $250 reference price on Tuesday.

With 261.3 million diluted shares outstanding, Coinbase now has a market capitalization of about $86 billion. This is bigger than much older exchanges like the Intercontinental Exchange (ticker: ICE), parent of the New York Stock Stock Exchange, which has a $67 billion market cap. Or the Nasdaq (NDAQ) which has a $26 billion market cap.

Founded in 2012, Coinbase is the largest U.S. cryptocurrency exchange, with 56 million verified users in the first quarter. Its online platform allows users to buy, sell, transfer, and store Bitcoin and other digital currencies. Last week, Coinbase unveiled a tremendous first quarter, with total revenue expected to rise 847% to about $1.8 billion.

Alkami Technology (ALKT) also posted a strong first-day performance. The stock kicked off at $41.26 and peaked at $49.32. Shares ended at $43, up 43.33% from its $30 IPO price.

On Wednesday, Alkami raised about $180 million after selling 6 million shares at $30 each, above its expected price range. The Plano, Texas, company initially filed to sell 6 million shares at $22 to $25, which it boosted to $26 to $28 earlier this week. Alkami will trade on the Nasdaq under the symbol ALKT. Goldman Sachs, J.P. Morgan, and Barclays are the underwriters on the deal.

Founded in 2009, Alkami seeks to level the playing field between smaller banks and larger financial institutions. The company provides a cloud-based digital banking platform that lets its clients—small banks and credit unions—offer retail banking services like account balances, transfers and bill pay as well as financial wellness, fraud protection and marketing. In September, Alkami said it neared 10 million digital users.

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From: Glenn Petersen4/18/2021 12:39:14 PM
1 Recommendation   of 178
New Investors Discover Tax Pitfalls of Robinhood and Other Trading Apps

Common tax-minimizing strategies are difficult or impossible to implement on the trading platforms that have boomed in popularity in the past year

By Laura Saunders
Wall Street Journal
April 16, 2021 5:30 am ET

Last year Dayton Leong, an active trader with accounts at nine firms, made scores of trades using the Robinhood app. He liked the free stocks he got from referring more than a dozen friends and found it easy to trade on his phone.

Recently, however, he has stopped trading in his Robinhood account, which has about $238,000 in it, mostly in Tesla stock. He says a major reason is taxes.

“Robinhood puts all shares of a stock into one big bucket,” says Mr. Leong, age 43, who lives in Berkeley Heights, N.J., and also works as a property manager. “I’m haunted by my 2020 capital-gains tax.”

With 2020 tax bills coming due, a wave of new retail traders are waking up to the fact that it can be difficult, and often impossible, to make tax-minimizing moves on new brokerage platforms such as Robinhood, Webull, SoFi, Uphold and Some don’t allow trading within tax-favored retirement accounts such as IRAs. Traders can also find it hard to track their “wash sales” that reduce tax benefits if they buy a stock within 30 days of selling the same stock at a loss.

Most vexing for investors like Mr. Leong is that despite the new platforms’ sophisticated technology they don’t make it easy to deploy a tax-wise technique known as “specific-lot identification.” Investors use it to lower their taxes, sometimes significantly, by choosing which shares to sell if they have lots bought at different prices and aren’t selling all of them.

Here’s why this issue matters. Tax laws allow investors with taxable accounts to use the losses they incur when they sell a stock that’s dropped to offset the taxes on gains from the sales of stocks that have climbed. The losses can also offset up to $3,000 of other income, such as wages, each year. Unused losses carry forward for use against future gains and other income.

“Now that I’ve done research on taxes, I wish I could sell the shares I choose, not a share selected by the ‘Sell’ button,” says Ashton Courson, age 26, a construction worker and manager from Portland, Ore., with about $17,200 in an account at Robinhood he’s not using much, in part for tax reasons.

Construction worker Ashton Courson of Portland, Ore., has been trading from his Robinhood account much less than he used to, in part for tax reasons.PHOTO: ASHTON COURSON

The option of selling specific lots is readily available at traditional brokerage firms. But Webull, SoFi, Public and Uphold don’t allow it, and Robinhood makes it difficult. This fact shocks professional money managers.

“I think it’s absurd. Taxes are a huge component of investment returns, and it’s an area where investors have some control,” says Bill Mulvahill, a CPA and money manager at Trailhead Planners in Minneapolis.

“It’s crazy—and it’s one reason Robinhood has been a boon to my business this year,” adds Kevin Kleinman, a financial adviser with Blue Haven Capital in Geneva, Ill. Mr. Kleinman said he has more than 10 new clients who were unhappy with Robinhood, and all had tax complaints, among them Mr. Leong.

Smart use of specific-lot identification can minimize current tax bills. Say that a trader holds Tesla shares bought at $400, $650 and $850 apiece since mid-September, 2020. If this person decided to sell some of the winners at a recent price of $675, the taxable gain would be either $275 or $25 per share, depending on which shares were sold. That’s a big difference—and it’s even bigger if some $850 shares were sold, bringing a loss of $175 per share that could offset taxable gains.

Any of these tax results could make sense: An investor with losses elsewhere in a portfolio might want to take gains, and one with gains might want to take losses. But many of the new trading platforms make this hard or impossible to do.

On Robinhood’s webpage about tax lots, the firm doesn’t tell customers they have the option of selling specific lots. Instead, it says sales will be on a first-in-first-out basis, known as FIFO, in which oldest shares are sold first. While FIFO could lower tax rates if the oldest shares have been held longer than a year, it might not. In the Tesla example above, FIFO would give the trader conceivably the worst outcome—a short-term gain of $275 per share, taxed at the rates for ordinary income like wages.

In the fine print of trade confirmations sent to customers after they’ve sold shares, Robinhood does offer the option of specifying lots. But the process is complicated.

Customers at Robinhood can’t specify a lot at the time of sale, as they typically can at traditional brokers. Instead, they search their history and email customer service with six datapoints, including dates and prices, before the trade settles two days after the trade date. Each request is assigned a case number and handled individually.

A Robinhood spokeswoman said it typically tries to tell customers if their request was successful within seven days, but the tax-season rush has temporarily expanded the wait to up to 30 days. Because of a high volume of inquiries, it’s also asking customers to email to find out the request’s status to ensure they’ll receive the information as quickly as possible.

Mr. Leong says he finds the process so daunting he hasn’t used it: “It’s too much work to dig through my order history to find lots and then hope they approve the sale.” In another account at a traditional broker, he says, his specific-lot history pops up as he’s selling shares, and he can easily select which ones he wants to sell.

Dayton Leong on the roof of a property he manages on Mulberry Street in Manhattan.PHOTO: KHOLOOD EID FOR THE WALL STREET JOURNAL

Mr. Mulvahill, who has experience selling lots online at five different traditional firms, says that at those firms typically lots can be chosen and sold with a few clicks.

A spokeswoman for Robinhood says it’s always looking for ways to improve its customer experience but has nothing to share at this time about changes to the process of specific-lot identification.

Other new platforms don’t allow specific-lot ID at all. Both Webull and Public mandate FIFO for sales, while Uphold sells the most expensive shares available (called highest-in-first-out, or HIFO), and SoFi orders lots so that losers are typically sold before winners.

Anthony Denier, chief executive of Webull, says it’s “looking to add more customization,” and a spokeswoman for Public says the company is “studying tax-minimizing options.” A spokesman for SoFi says tax-lot detail is “on the road map for future releases.” Josh Greenwald, head of trading for Uphold, says the company will consider making changes to tax offerings as it expands.

What difference does tax management make to the bottom line? According to a recent study, systematically taking losses that reduced taxable gains boosted after-tax returns by an average of 0.82% a year from 1926 to 2018 for an investor in a 35% tax bracket. The gains could be larger under some circumstances, says one of the study’s authors, Terence Burnham of Chapman University, such as if an investor traded small or volatile stocks or shorted them.

Dan Herron, a CPA in San Luis Obispo, Calif., who just prepared a return for a client who made more than 10,000 trades on Robinhood last year, says: “I tell clients who trade to specify lots when they sell, or they could get hosed on taxes.”

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From: Glenn Petersen4/25/2021 3:53:51 PM
1 Recommendation   of 178
PayPal CEO Dan Schulman: Cryptocurrency Is the Real Deal. And the Superapps Are Coming.

Time Magazine
APRIL 25, 2021 6:50 AM EDT

Dan Schulman, president and CEO of PayPal, at the company's offices in San Jose, Calif., in 2016.
Robyn Twomey—Redux

(Miss this week’s The Leadership Brief? This interview below was delivered to the inbox of Leadership Brief subscribers on Sunday morning, April 25; to receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)

Like many CEOs on the West Coast, Dan Schulman has a sort of a uniform: blue jeans, black sweater and ostrich-skin cowboy boots. When it came time to replace his boots, Schulman, the CEO of PayPal, used one of the company’s new services to make the purchase. With a few clicks, in a few seconds, he bought the boots and paid for them with Bitcoin. “ Boom,” he says. “It was pretty cool.”

The fintech giant had a record year as the pandemic drove shoppers from stores. Instead, they bought groceries, movies and underwear on their phones and computers. PayPal does business in more than 200 countries and deals in more than 100 currencies. It did a staggering amount of business last year, processing transactions at a rate of 1,000 per second during the peak holiday shopping season. In total, PayPal processed 15.4 billion payments, with a value of $936 billion last year. PayPal also had the most new product launches in its history, including launching QR-code payments in 20 markets around the world in response to demand for germ-free transactions. Another big initiative: helping move digital currency into the mainstream, by adding cryptocurrency services. Schulman recently joined TIME for a conversation on the future of cash, central banks and the security of digital currency.

(This interview is edited and condensed for clarity.)

How much did fear of infection during the pandemic drive lasting changes in how people shop and pay for things?

There were two things that dramatically accelerated the trend of digital payments by as little as three years and maybe as much as five years. And by the way, that’s just continuing to grow at an accelerating rate. The first is, we had no choice. We were all quarantined in our homes. We needed to live. We needed to buy things, and everybody had to buy things online. Eventually that turned from this necessity to convenience. People realized, you don’t have to wait in line at a cashier; it can be delivered whenever you want, you have more choice, more different deals.

No. 2 is everything started to go digital, even in-store, because of hygiene. People wanted to be sure that they could protect their cashiers, and customers wanted to be sure that they were going to be safe. Nobody wanted to touch cash, and that led to a large increase in use of digital forms to not just pay, but to look at menus and to look at offers and that kind of thing in stores.

What does your business look like in the next five to 10 years?

First of all, retail fundamentally changes. It moves from a strategy of, How do I attract people to my storefront?, to basically, How do I optimize for home delivery? How do I optimize around all things digital, online and offline? Effectively the differentiation between those two things disappears. And that means that retailers need to think about, Where do they meet consumers? Consumers aren’t just going to go to their website. They’re going to be in large consumer platforms like TikTok or PayPal or others. The reason Walmart wanted to buy part of TikTok is they wanted to kind of put shopping into that platform. We call it contextual commerce.

It’s the same thing inside PayPal. We know that people will start to utilize wish-list shopping tools, and wish lists are really a form of creating an individualized demand curve. This is what you want. This is the price point that you want it; retailer, if you can give me that, I’ll buy it. And so retailers are coming to where you are looking individually, personalizing offers to you. Retail is going to shift dramatically.

And how are we going to pay for things?

There are probably going to be six to 10 superapps that evolve. You won’t have 50 apps on your phone, because you can’t remember 50 usernames and passwords; you don’t want to put in your financial information into every single one of them; you can’t remember the nav system on all of them. These superapps that will basically intermediate other apps, so you log in once, you have a common password, you have all of your data and information in one place that can be used to feed products and services on that platform. It will make it simpler and easier for the consumer.

So cash is no longer king?

Ten years from now, you will see a tremendous decline in the use of cash. All form factors of payment will collapse into the mobile phone. Credit cards as a form factor will go away, and you will use your phone because a phone can add much more value than just tapping your credit card. And so when all of those things start to happen, then central banks need to rethink monetary policy as well, because you can’t just issue more paper money into the system because people aren’t using paper money. And so this is the advent of digital currencies.

What does this pending shift to digital currencies mean for the financial system as we know it?

In the next five to 10 years, you’re going to see more change in the financial system than you have over the past 10 to 20 years. How do we think about modernizing the existing financial infrastructure? It needs modernization, because it’s inefficient today. If you cash a check, it can take three days for you to get your money. If you do an international remittance, it can take seven days to get your money. And it’s too expensive. The “take rate” across the financial system throughout the world is about 2.8%. For the last 10 years, which, by the way, you’d expect with volume and technological improvements that would drop, but the worst part about the 2.8% is that if you have less income, or are outside of the system, and you’re not affluent, then that take rate is like 1,000 basis points; it’s not 280 basis points. And if you’re really affluent, the take rate is 25 basis points. And so, when you think about it being expensive, exclusionary and efficient, we really need to start to think about, How do you modernize that system? Is there a way that you can do things more efficiently, with less cost, more inclusively, and add more utility into the system?

What is the difference between Bitcoin and other cryptocurrencies from central bank–issued digital currencies?

Central bank–issued digital currencies can also take advantage of distributed ledger technology [DLT] or other modern technologies, but they’re basically digitizing a fiat currency like the U.S. dollar. A digital dollar would be fully backed by the U.S. government, but done in a digital fashion, and that might allow the government to open up Fed funding to other institutions besides banks, potentially companies like PayPal, where you could fund straight from the Fed right into a digital wallet. You wouldn’t have to send out stimulus checks in the mail—just go directly into their digital wallet through a digital currency, instantaneous access, no cost and friction.
Demand on the crypto side has been multiple-fold to what we initially expected. There's a lot of excitement.- DAN SCHULMAN, CEO OF PAYPALYou’ve taken a very deliberate approach to digital currency, investing heavily before introducing a consumer product. Why now?

We’ve been looking at digital forms of currency and DLT for six years or so. But I thought it was early, and I thought the cryptocurrencies at the time were much more assets than they were currency. They were too volatile to be a viable currency. And it was still a little bit too much of people not really understanding what they were going to get into, and what we really wanted to do is make sure that it became a little more mainstream so that we would work hand in hand with regulators before we put anything out into the market.
What’s the demand been like for these new services?

Demand on the crypto side has been multiple-fold to what we initially expected. There’s a lot of excitement. How do we defend against more and more sophisticated cybercrime as all our assets move to digital?

We need to battle cyber in two ways. One, you have to create wide moats and high towers and turrets to try and keep as many bad people out as possible. But it’s impossible to keep bad people out because usernames and passwords are stolen. So the real trick of this is how do you keep data from moving outside. So if you make a transaction [using PayPal], it’s not your username and password that’s giving you permission to do that. It is 130 different variables that we look at on every single transaction, in milliseconds, to be sure that it’s you. It’s this idea of Big Data of really understanding who you are, not who you said you are. Things like two-factor authentication, that’s grade-school stuff. It needs to be much, much more sophisticated than that, and we’ve spent as much as we need to spend to ensure that we do our very best to not allow data to leave our system that isn’t valid. But I will say this for every company around the world: this is an issue that should be front and center.

When did you decide on your look?

I don’t really call it a look. I call it very comfortable. I started this when I was running Virgin Mobile, a long time ago. I’ve been wearing cowboy boots forever. I’ve been wearing jeans and like a black sweater forever. Some people say, “Oh, you went to Silicon Valley.” No, no. This was me way before then.

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