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Qpagos: A New Name In Fintech

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There are lots of entrepreneurs situations these days for investors to choose from.  QPAGOS (QPAG, $0.21: OTC) is a company a little further along the curve with approximately $3.5+ million in revenues.

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QPAGOS (translation: Q Payments) is a virtual bank serving  Mexico where they offer an integrated network of kiosks and terminals totaling more than 700.  This enables customers to deposit money to pay for goods and services like rent, utility bills etc. Payments can be made at the kiosks or by mobile phone.  This represents a valuable convenience in a country where most people have bills to pay but don’t have a bank account.

The company is dedicated to growing its network of kiosks virtually everywhere in Mexico while adding new features such as micro loans.  QPAGOS earns it way by charging fees. We were hard pressed to find an exact percent but we suspect transaction fees are well in excess of 5%.

Here is what makes their business model so interesting.

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Mexico: The Promised Land For Payment Processing

Having heard about QPAGOS,  I decided to check out Mexico for myself.  It was time to say goodbye to overcrowded freeways, overpriced rents and Taco Bell. I wanted a real enchilada.  

Inspiration comes from the legendary investor Jim Rogers who is known to have circled the globe on his Harley Davidson looking for interesting investment opportunities.

I don’t own a Harley and stopped making investment recommendations long ago.  But that doesn’t take any of the fun out of the adventure.  So off I went on the journey.

The first stop was the beautiful Mexican seaside town of Puerto Vallarta along the Pacific Ocean.  In less than 24 hours after arriving, I discovered something rather amazing: no acceptas la tarjetta de credito!   What do you mean no credit cards?

After some reading I discovered the vast majority of Mexican business transactions, including restaurants, supermarkets and other stores are made in cash.  Official figures put to total as high as 95%.  Check out the World Bank and they claim that nearly two-thirds of the Mexican population doesn’t even have a bank account.

For the average observer, this may not be a surprise.  After all, Mexico has a huge percentage of poor citizens, wages are extremely low and there is only a small segment that are in the middle-income.

Inspiration from Nairobi

But then I was reminded of Kenya and the success of M-Pesa, the mobile money transfer business that was the focus of a 60 Minutes piece in 2016 titled “the future of money”.

The report claims that virtually everyone in Kenya has a mobile phone and this enables them to download M-Pesa and transfer money to pay rent, utilities, or anything else where the recipient has an M-Pesa account.

Mexicans are Mobile Too

According to the market research firm Statista, Mexico will have exactly 86.3 million mobile phone users this year and the figure continues to rise.  There are about 120 million in the population so the user population is about two-thirds.

This matches the number of unbanked citizens. So if M-Pesa can work in a country even more impoverished and under banked, why can’t it work in Mexico?

QPAGOS is Making Noise

Well perhaps Mexico is getting the message. According to Reuters QPAGOS was incorporated on September 25, 2013.  It appears they are using pretty much the same business model of M-Pesa.

The Company’s Payment Gateway connects service providers and their clients through Qpagos Corporation’s technology and processing system. Its RG Processing is a platform designed for processing payments collected through various devices and interfaces, such as self-service kiosks, windows (WIN) terminals, Java terminals and extensible markup language (XML) terminals. RG Processing controls various financial operations, provides monitoring services and accumulates statistics.

Competition from Traditional Sources

QPAGOS competitors include Wal-Mart, Soriana, Chedraui, OXXO and 7-Eleven.  No doubt formidable players but then the potential is so large, it hardly matters. Besides, most of these are fixed locations rather than mobile.

QPAGOS is getting some solid revenue traction. Through the first nine months of 2017 revenues totaled $2.9 million 43% ahead year earlier levels.   For all of 2016 QPAGOS generated $27 million.  The leadership is in the hands of 69-year-old Gaston Pereira who has been with the company since the beginning.  Senior Pereira’s bio in the payments world of Mexico is lengthy.

We surmise some sort of IPO or reverse merger was accomplished as the stock of QPAGOS is quoted in the pink sheets.  When last we looked it was trading around $0.20 per share.

On the US side of the great wall of Mexico, the world is watching as cryptocurrencies threaten the status quo.  On the other side, there are enough opportunities in fintech it would make Jim Rogers get off his Harley and take notice.  QPAGOS is one with a big upside if management can keep the company moving forward.  By the way for those Harley owners traveling to Africa, M-Pesa is listed on the Nairobi exchange.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 21 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Ethereum

Ethereum: Building A Lead In The Marathon

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A lot of what is written these days on cryptocurrencies fits into one of three categories. The first is a description of the latest price moves up and down.  We all know how much drama there is and that makes good headlines.  

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Let’s call the second category the SegWit syndrome where we receive a description of the latest breakthrough in blockchain technology written from a developer viewpoint: hard to read and nearly impossible to understand.

In the third category is all of the other highly qualified writers and journalists that I have not already insulted.  Apologies to all.

For more than 30 years as a Wall Street analyst, hedge fund manager and Director of Research, my approach is to access things from an analytical perspective.  Technology is constantly changing the world but the things that make for long term business success pretty much stay the same.  That is why our bias tends to favor the crypto giants Bitcoin and Ethereum.

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Focus On Ethereum

By now it is probably no longer necessary to describe Ethereum’s open source blockchain platform that features self executing smart contracts.  Everybody knows that by now, right?

As a business person and investor, I am drawn to the leadership already created by Ethereum founders.  Say what you will about Initial Coin Offerings, but Ethereum accounts for over 80% of that market.  But that is just surface stuff because if ICO were to stop overnight, the demand for Ether would not end.

One of the forces behind this prediction is the Enterprise Ethereum Alliance which is now just over a year old.  Membership totals somewhere near 300 companies from JP Morgan and MicroSoft down to much more modest enterprises.  The mission of EEA is to bring together Fortune 500 companies with blockchain experts.  This is a great selling tool for Ethereum and as the list grows, so does their competitive strength.

Capital And Competition

To be successful, it is critical to always keep an eye out for what is going on around your business.  It is a well turned phrase that if a business doesn’t disrupt itself, someone else will. That takes capital. These days capital is flowing into crypto in many different ways.

The Weird Journey of Algorand

Venture Capital are dying to find a way of tapping into the cryptocurrency wave.  As we pointed out in a recent article, VC’s have been wounded by things like crowdfunding and ICOs and looking for about any action.  That is when I came across MIT’s Algorand blockchain project.  It raised $4 million in seed money from two VC’s.  Now $4 million is chump change but still it made me ask, what were they thinking?

Here is how CoinDesk described the project.  Algorand constitutes a digital currency and transaction platform.  It represents the latest effort to build a wholly new blockchain aimed at tackling some of the perceived governance issues associated with distributed systems.

The Professor Speaks

The head of the Algorand is MIT professor,  Silvio Micali. In addition to spending 30 years in cryptography he is also a Turing Award winner.  So obviously he is no slouch.  But apparently all these years in academia has depleted his appreciation for Econ 101 which states that everyone behaves in a way to optimize profits.  Professor Micali and the Algorand platform appears to be forgetting the value incentives for crypto mining.

At a recent conference Macali explained his attitude and the Algorand approach in this way. “We must use incentives as a last resort.” “ When you put incentives out there, people learn how to use those incentives for making money in ways that are nearly impossible to predict.”  Wow, that sounds a lot like creative capitalism.

Crypto Socialism

Micali believes that miners who have invested lots of dough in expensive equipment are dealing in trivial computations and do not need to be rewarded.  Instead the Algorand platform uses “validators” who in return for doing trivial computations will not have to invest in expensive equipment.  

Coindesk describes Algorand as the latest effort to build a wholly new blockchain system. The best guess on a release date is sometime in the next year. Taking that statement at face value out of respect for the author, at this time,  investors in Ethereum have little to be worried about from competition.  In the meantime Ethereum founder Vitalik Buterin is working on something call a DAICO.  It is intended as an improvement on the current Ethereum ICO process.  As we suggested earlier, when a tech company disrupts itself, it reduces the chances of being overtaken by others.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 21 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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The Abyss Becomes First Startup to Test “DAICO” Concept

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An ICO by the name of The Abyss is looking to become the first project to test Vitalik Butrin’s “DAICO” concept. The founder of Ethereum outlined the new crowdfunding protocol in a post that appeared on the Ethereum Research Forum in January. If successful, The Abyss’ token raise could have profound implications on the budding world of ICOs.

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The Abyss Token Sale

Next-generation gaming platform The Abyss is developing a token sale based on Butrin’s Decentralized Autonomous Organization Initial Coin Offering, or DAICO for short. The company will launch a month-long token sale on Mar. 7, with early participation giving investors a bonus of up to 25%. A hard cap of $60 million has been placed on the sale, with 1 ABYSS token valued at 24 U.S. cents. Minimum investment in the project is 0.1 ETH.

According to a post that appeared on the project’s Medium channel last month, The Abyss token raise “will represent an advanced and improved ICO mechanism, allowing token holders to control the fund withdrawal limit, also providing an option to vote for refund of the remaining contributed money in case the team fails to implement the project. With all this, The Abyss project is to become the world’s first Token Sale, pioneering and promoting the DAICO concept.”

The Abyss essentially serves as a multi-level referral platform allowing gamers to participate in in-game and social activities. It also allows developers to lower marketing expenses by directly engaging the gaming community.

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As far as we can tell, no other company has adopted DAICO yet. As a member of the Ethereum Enterprise Alliance (EEA), The Abyss could provide a valuable case study into the system’s viability and reception among investors. As it turns out, The Abyss is very well received by the blockchain community, with several third parties giving the company a favorable review.

DAICO Model

At the core of Buterin’s DAICO model is the need to minimize investor risk during an ICO campaign. The solution is to combine the current ICO structure with the DAO, The resulting DAICO system utilizes smart contracts to encode certain rules into the token raise that startups must follow from the very beginning.

For example, DAICO could stipulate that management receive “approval” from investors each time it wants to utilize funds generated from a crowdsale. In this case, the company would “tap” investors for approval, and the investors themselves would decide whether to grant the firm access to the funds.

DAICO systems can also implement KYC/AML standards and structure a campaign more transparently than current methods. Widescale adoption of this system could have a lasting impact on the blockchain economy by weeding out scams and other companies looking to generate easy cash to finance their business operations. Hacked covered the development of DAICO in a Jan. 19 article, which provides greater insight into Buterin’s thought process.

ICOs generated billions of dollars for hundreds of startups last year, but the parade may soon end as regulators begin clamping down on token raises. The U.S. Securities and Exchange Commission (SEC) has taken special interest in ICOs, warning companies that their definition of a “utility token” will come under intense scrutiny by federal regulators.

Although ICOs aren’t illegal in the United States, there’s a good chance they will be categorized as securities. Such a designation would make them bound by federal securities laws, something most ICO projects want to avoid entirely. Against this backdrop, many ICOs are electing to avoid the U.S. market entirely.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 161 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Lessons From Venture Capital Craziness

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Financial technology or Fintech is a white hot area these days and lots of folks are after a piece of the action.  The payments business is one huge area of opportunity even before counting cryptocurrencies. When the global economy generates more than $90 trillion in GDP, that means lots of money constantly on the move.  Trouble is, these days, it moves slowly and at a high cost.

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With that much at stake, there is no shortage of entrepreneurs with the next disruptive idea.  As an analyst and investor, it is hard to choose who knows their stuff.   Revulut got my attention and here is how it happened.

Venture Capitalists are wrong on about 95% of their investments but to put a valuation of this magnitude was quite unusual, maybe even a little crazy. The crypto buzz had a lot to do with Revolut’s capital raising success.

Last summer, Revolut founders Nikolay Storonsky and Vlad Yatsenko raised over $66 million in VC funding and another $23 million from Crowdfunding. That is serious money considering the company was scarcely a year old at the time with hardly any revenues.  This placed the implied value of the company between $200-$400 million.

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It would be easy to declare insanity in the ranks of venture capital.  An equally plausible conclusion is that a major source of risk capital has done their homework on crypto and has given their seal of authenticity.  Just something to keep in mind as the price of crypto is soaring and the word bubble comes up.    

About Them

The Revolut app allows customers to open a current account in under 3 minutes, and includes a prepaid contactless MasterCard debit card.  So far there is nothing unusual about Revolut. Sounds like about any other branchless bank.

The company marketing offers freebees like free international money transfers that could save users 3% so that is good.  Also there is free access to global ATM machines although no mention is made of what networks are included or their location.  

And there is one other caveat; the free ATM access ends when you withdrawn $250 in any month.  That is chump change for most people.  If you average closer to $500 per month at the ATM, you will want to select the Premium service.  That will cost $6.99 per month.

OK so not everything is really free but still $6.99 per month beats the $25-$35 charged by conventional banks.

Offering freebees can be a great way to attract customers but read the fine print before making any commitments.  In Revolut’s case you really have to dig into the details such as the limit of free ATM withdraw before little charges start to creep in.  And if you are an American here is the most puzzling detail taken directly from the company website.

“You can transfer money to banks in the United States using Revolut. However, if you are currently living in the United States, you cannot make a bank transfer from Revolut to your local bank account due to licensing restrictions.”  Something must have been lost in translation: what does this mean?

The firm launched personal international bank account numbers (IBANs) across Europe last summer.  So if you live in the United Kingdom or one a a dozen or so Eastern European countries, Revolut offers real value added services.  For the rest of the planet, not quite yet.

Since then they have begun integrating  currencies like Bitcoin, Ethereum and Litecoin.  Here is the sizzle to bring in new customers.  “Revolute will now be able to buy, hold and exchange Bitcoin, Litecoin and Ethereum in just 30 seconds at the best possible rates.”  There is a 1.5% fee for this service which is competitive with exchanges like Coinbase and others.

Revolut is adding other new services beyond cryptocurrency to lending and pay-as-you-go travel insurance at the tap of a button.  Altogether, not a bad business plan but it is the crypto connection that moves the needle.

VCs Depending On Experienced Management

Storonsky is more than a slick operator with a pretty pitch deck.  He and his partner have deep experience in the global payments business.  Nikolay spent years as a currency trader with Credit Suisse so he understands the level of fees charged by the current system.  

The technical wizardry, however, rests with his partner Yatsenko. Vlad spent over 10 years building financial systems for major Wall Street investment banks.  He serves as the company’s CTO.

Conclusion: Why Is Revolut Unique?

The global payments business has long been a gigantic oligopoly controlled by a series of networks, governments, banks and a group of oversized corporations such as Visa, MasterCard, Fiserv and others.  

Taken together it is like a mafia of financial behemoths interested in nothing more than keeping the status quo.  Perpetuating the system enables them to maximize the amount of fees for the mindless service of money transfer.  Revolut could be one of many disruptive forces but will it take $90 million to get them there.  Evidence shows the answer is most definitely no.  The cache of cryptocurrencies in the Revolut business mix has attracted Venture Capitalist and others to pay outsized prices for access.  Bravo for crypto investors everywhere.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 21 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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