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Are we soon reaching peak niche banks?


This week in fintech

September 21 · Issue #28 · View online

A weekly summary of the latest news in our world of finance, design, and technology.

Also: 🌳 Making the earth greener, one year at a time 🌊 From the cloud to the ocean 🥖 Bread insurance? 🍎 Apple and monopoly 📈 Are we soon reaching peak niche banks? 💳 Yes! We have reached peak niche banks!

🌳 Making the earth greener, one year at a time
Google last week announced that they are the first major company to  eliminate their entire carbon legacy . This comes after  Apple announced a target of becoming carbon neutral across its whole business and manufacturing supply chain by 2030. Microsoft has gone even further, pledging to  remove “all of the carbon” from the environment that it has emitted since the company was founded in 1975. In Stacc we’re slowly working on becoming carbon neutral, and last week we became Eco-lighthouse certified.
🌊 From the cloud to the ocean
On a related note, Microsoft, one of the world’s largest cloud providers, sank a data center underwater two years ago . Last week they resurfaced it, and their researchers assessed how it has performed and what they can learn from it about energy efficiency. Their first conclusion is that the cylinder packed with servers had a lower failure rate than a conventional data center, about one-eighth of what they see on land. Come to think of it having data-centers on the bottom of the ocean makes sense in a lot of ways: The temperature is cooler and more stable, and it is harder to destroy by both natural disasters and terrorist attacks. The main worry might be electronics and water don’t mix that well. Maybe we have to rename it from «the cloud» to «the ocean» someday?
🥖 Bread insurance?
Accenture, in their Disruptability Index, called Insurance one of the most susceptible to future disruption, and one of the least innovative sectors. Interestingly enough, one of the latest insurance trends is very old: Bread funds, an alternative kind of disability insurance that can replace lost income.  This has been a trendy alternative for Dutch independent entrepreneurs to traditional insurance . Participants pay a monthly contribution to a pool, plus a small administrative fee, that’s made up of contributions from other self-employed folks. When someone in the group needs the funds, they file a “claim” with their group leaders and are gifted the money for as long as they need it — receiving it as a gift allows recipients to accept the funds without paying income taxes. The pool’s recommended minimum is 25, and the maximum size is 50 people to avoid a degree of anonymity. A ‘broodfonds’ organise solidarity by personal connections and networking, and its members are self-governing, but there are platforms that help make it more professional like  Risicodelen . The idea behind bread funds reminds me of Tribe insurance, where the central concept was that their customers created tribes who merged and shared the risk. This should give lower claims payments and thereby lower prices. Unfortunately, Tribe Venneforsikring was  unable to create profitability , and therefore silently closed down a while ago.
(I btw came across a  comparison of different kinds of income insurance in seven european countries written by the Institute for Social Research in Norway if you found this topic interesting)
🍎 Apple and monopoly
Apple has long been criticized for locking down the NFC functionality on their phones and restricting it to Apple Pay. This is seen as an anti-competitive move to keep competitors at bay. The EU is now looking to introduce new legislation that  will force Apple to allow alternative payment services to coexist with Apple Pay . Apple’s good news is that the EU will wait until 2022 before making any legislative changes to its current digital policy. 
Apple is also at the moment being investigated by the EU Antitrust Commission over its  App Store policies. This comes in the wake of Epic Games, creators of the game Fortnite,  suing Apple for their App Store policies , especially their 30% revenue cut. Apples reason for distributing apps in their App Store are good: 
  1. The software is sandboxed, where they can only do things that Apple allows.
  2. Apps are much easier to distribute and update.
  3. Apple is providing frictionless, safe payment for apps.
However, the problem comes with Apples deciding what is safe and ok on their platform and the 30% revenue cut. As Benedict Evans says about the case:  “When your product has a few points of market share you can make whatever choices you like, but when you dominate the market, other rules start applying”. Francisco Tolmasky, who was on the original iPhone team, noted this  on Twitter :
“Remember: Apple’s iOS rules would not have allowed for the invention of the web browser. Let that sink in”.
CEO of Coinbase, Brian Armstrong, also chimed into the discussion claiming that one of the main reasons that decentralized crypto apps, called dapps,  have not gone mainstream is that the Apple and Google apps stores don’t allow several essential features that decentralized apps require.
📈 Are we soon reaching peak niche banks?
Metal cards have been all the rage in banking in recent years. This week we came over two new ones:
The first one is the  X1 credit card, targetting the bonus point hunter , unlocking higher tiers the more you spend. However, one of the more exciting features is Auto-expiring virtual cards to automatically end free trials and a feature for canceling subscription payments in one click. Quite useful in these SaaS-times.
The other one is quite eccentric:  Letter - a new kind of exclusive bank . Apart from its diamond induced website (it’s well-crafted, I’ll give them that), I don’t see the significant customer value proposition. However, they have a very nice feature that I wonder why more banks haven’t implemented: Every time you use your card, they’ll automatically donate to a charity of your choice.
💳 Yes! We have reached peak niche banks!
MSCHF is announcing the world’s first competitive multiplayer bank account. Come again, you say? Well, MSCHF, an artssatirebranding-studio (we mentioned them in week 18 - selling a cut-up Damien Hirst painting) , will send out access codes to people on their  waitlist. Once those people receive their card in the mail, the game begins. The cards link back to the same bank account, owned by MSCHF, who will deposit money in the account at random. The players then race to spend the money. In this project, MSCHF partners with card payment startup , who lets anyone  generate virtual and disposable payment card numbers for free, allowing those users to keep their actual credit card numbers safe. Here is an excerpt from MSCHF’s manifesto on the project: “American Express is dying to layer gamification upon gamification until the credit card itself is all but invisible: cashback, points, frequent flier miles, lounge access, industry-specific rewards. [..] The core of the premise is this: if your every purchase makes a set of 6 auxiliary numbers go UP, perhaps you will forget that the main number (your bank balance) is going DOWN.”  Read more about the game here.
Card V. Card by MSCHF
🙏 Don’t keep it a secret!
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Marius Hauken, partner Stacc X
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