Young colleagues checking their crypto investment app

With Funding Down 70%, Here’s What Fintech’s High Flyers Are Worth Now

Finance is a crucial change agent in society, government, and technology.



The introduction of artificial intelligence (AI) is fundamentally altering the financial world. AI is a form of technology that confers intelligence on machines. In my 2013 book, Economic Modeling Using Artificial Intelligence Methods, I demonstrated how



AI could forecast economic indicators, predict stock prices in stock exchanges, perform credit scoring in banks, and model complex financial instruments such as options, futures, and derivatives. In our 2017 book, Artificial Intelligence and Economic Theory, Evan Hurwitz and I demonstrate how AI affects how economists think about demand and supply, pricing, and behavioral economics. Utilizing AI’s capabilities, the financial sector is on the verge of massive disruptive changes that present new opportunities and risks. This article examines how AI affects economic systems, specifically the financial sector, markets, and the government.



Using machine learning, predictive analytics, and natural language processing, AI has the potential to revolutionize the way institutions operate. Additionally, AI opens up new avenues for customer service, risk management, and business advice.



For example, AI-powered chatbots and virtual helpers help with customer service around the clock, simplifying user interfaces and making it easier to answer questions quickly.



Consequently, they enhance consumer experience and reduce expenses. For instance, in risk management and credit scoring, AI algorithms can examine enormous amounts of data to identify patterns and assess risk levels. This makes financial services available to a larger population.



In the investment world, robo-advisors have become popular. They use AI’s analytical capabilities to offer cheap, personalized financial advice. Through these changes, AI is making it easier for more people to use financial services and driving the global financial system to be more open to more people.



AI is also changing the way financial markets work. For example, AI has changed how stocks are bought and sold with high-frequency algorithmic trading. AI can analyze vast financial data in milliseconds to identify trends and make trades. This is a substantial improvement over traditional methods making markets move faster, more open and work better. However, increased market speed ushers market stability and systemic risks, requiring protection and strong oversight to avoid these problems.



Regulators worldwide seek to deal with AI’s problems, such as data protection and algorithmic transparency. Accordingly, there should be a balance between encouraging innovation and protecting the financial security and consumer interests in regulations. AI can simplify compliance procedures, monitor



financial transactions in real-time for illicit activities, and predict market glitches, making regulators more proactive.



In the African market, the African Continental Free Trade Area (AfCFTA), a trade deal that aims to increase trade significantly within Africa, offers unique opportunities for AI.



The agreement covers a broad range of aspects of Africa’s economy, such as digital trade and the protection of investments. Moreover, the number of countries in the AfCFTA will make it the largest free trade area globally, linking 1.3 billion people in 54 countries with a combined GDP of $3.4 trillion. AI can make the AfCFTA work better and reach its goals.



For example, AI can help improve trade logistics by making delivery systems, customs processes, and tracking and tracing more efficient. It can find the best ways to move goods, predict delays, and give traders real-time information. In addition, AI can analyze trade data to identify patterns, trends, and connections. This can help policymakers make better choices and predict and respond to future trends better.



AI-powered systems can make cross-border e-commerce more efficient, a sector expected to grow under the AfCFTA. AI can create personalized product recommendations and automate customer service. In education and training, AI can help people acquire the skills they need for an African economy that works better together.



However, for AI to achieve the goals of the AfCFTA, it is essential to have good AI governance and regulation. Furthermore, we need to invest in digital infrastructure and education.



In conclusion, AI is vital to changing how the world’s economic system works. It affects financial services, markets, and regulation. AI is ushering in a new age of innovation and efficiency.



However, as AI continues to change how the financial world works, a cautious and thorough approach is needed to make the most of its prospects and manage its risks well. There needs to be strong regulatory frameworks, investments in AI literacy and skills, and a commitment to ethical AI values. These objectives are essential if we want an AI-driven financial future that is both prosperous and sustainable in Africa.

Manager engineer control Innovation of robotics  automation robot ai Business data analytics process management

How Artificial Intelligence Affects The Financial Sector In Africa

<a href="https://www.forbes.com/"></a>Valued at $2.2 billion in 2021, African money-transfer startup Chipper Cash was slow to adapt to the funding collapse of 2022. Now, after layoffs and a deep valuation cut, it’s focusing on the basics–and profitability.



The layoffs at&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/06/06/how-two-africans-overcame-bias-to-build-a-startup-worth-billions" target="_blank" rel="noreferrer noopener">Chipper Cash</a>, a five-year-old fintech startup that lets African consumers send money to each other, started slowly. In July 2022, four recruiters were dismissed. Seven quality assurance engineers came next, two months later. On a Sunday night in early December at 12:01 AM, about 50 employees, or slightly more than 10% of the company, received emails in their personal accounts telling them they no longer had jobs, and access to their work computers had been terminated. Staffers were stunned by the abrupt execution of the layoff. “There was shock and disgust,” a former employee says. Then, after another two months, even deeper cuts came: Chipper slashed about 30% of its staff.



It was a dramatic turnabout for a company that included “lead with empathy” as one of its four corporate values and had been&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/06/06/how-two-africans-overcame-bias-to-build-a-startup-worth-billions/">featured in&nbsp;Forbes</a>&nbsp;as one of the most promising startups in fintech just eight months before.



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In February 2023, Zepz, a U.K.-based international money-transfer company formerly known as WorldRemit, smelled blood and approached Chipper with a take-out offer. Zepz sent a letter of intent saying it would pay between 5% and 10% of its own stock to buy the startup, pending more due diligence. Zepz had been valued at $5 billion in an August 2021 fundraise, but market values for fintech stocks had since dropped by 50%. Even if you thought Zepz was still worth $5 billion, which was doubtful at best, the deal would have valued Chipper at between $250 million and $500 million–a brutal discount to the $2.2 billion valuation it fetched in late 2021.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“I was fully aware that we were living in a time when capital was cheap. And when capital is cheap, that&#8217;s when you want to do the capital-intensive things.&#8221;— Ham Serunjogi
</blockquote>



The talks broke down. A Zepz spokesperson says the company walked away from the deal because they couldn’t get enough financial information from Chipper, and what they did see made them question the viability of the business. Ham Serunjogi, Chipper’s now 29-year-old CEO, says that Chipper provided all information requested, Zepz refused to share its own financial metrics and Chipper was the one to walk away. “I have never had any intention to go out and look for a buyer or to be acquired,” Serunjogi told us in May, speaking from his office at his home in the San Francisco Bay Area.



In April, Chipper lowered its internal 409A valuation–the market value it uses for issuing employee stock options–by 70%, cutting its common stock share price from about $13 in late 2022 to $3.89, according to a former employee and a document viewed by&nbsp;Forbes. It also raised roughly $25 million in convertible debt, says a person familiar with the financing–debt that will convert to equity at a $450 million valuation if Chipper gets acquired or has another big fundraise.



Chipper’s predicament is emblematic of the challenges many fintech startups face today. In 2020 and 2021, as Covid pushed more transactions online and consumers flocked to fintech apps, startups and their backers acted like the fast growth and good times would continue for years. Chipper, which offers low-cost money transfers, bill payment, stock investing and crypto trading for consumers in Africa, plus payment services for businesses there, had amassed five million registered users in seven countries, including Uganda, Ghana and Nigeria, in just the four years after its founding. It booked more than $75 million in revenue in 2021 (excluding cryptocurrency transactions), according to the company, and between $100 and $150 million in 2022, says a person familiar with its finances, compared with $18 million in 2020.



Serunjogi was pursuing a land-grab, growth-at-all-costs strategy, aiming “to capture as much market share and new geographical footprint as possible. And that&#8217;s an expensive endeavor,” he admits. Then as interest rates rose and the stock market sank, investors put away their checkbooks. Profitability suddenly became more important than growth.



Now Chipper is trying to dramatically cut costs and change its strategy while preventing employees from thinking they’re on a sinking ship. “I feel like I’ve grown up so much in the last 12 months,” Serunjogi says.



He has wrestled with the emotional toll of layoffs and a feeling that his employees weren’t taking their jobs seriously enough. In January, he decided to eliminate “lead with empathy” as one of Chipper’s four corporate values. “It was becoming a substitute for accountability,” he says. As he tries to turn the company around, he faces the tough task of still striving for rapid growth–and getting close to profitability–on a much tighter budget.



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Serunjogi grew up in&nbsp;Uganda, and while in high school he saw the problems his dad faced trying to move money through Africa’s disjointed banking system. A couple of years later, he enrolled at Grinnell, a small liberal arts college in Iowa, where he met Maijid Moujaled, a Ghanaian computer science major. The two soon began talking about developing an app that could become a Venmo for Africa.



They cofounded Chipper in 2018 and eventually raised $300 million in funding from investors including FTX, Ribbit Capital and Bezos Expeditions. Serunjogi spent aggressively to grow his customer base because of the nature of the money-transfer business: if you’re a consumer in Nigeria, you’d rather be able to send money to twenty different countries than two. “I was fully aware that we were living in a time when capital was cheap. And when capital is cheap, that&#8217;s when you want to do the capital-intensive things,” he says.



At the end of 2021, Chipper created its 2022 financial plan and intended to keep burning through large sums of cash, assuming capital would still be abundant. As tech stocks tumbled through the spring of 2022, Chipper began revising its plans. But while&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/07/28/in-fintech-2022-is-becoming-the-year-of-layoffs" target="_blank" rel="noreferrer noopener">many fintech companies started doing layoffs that summer</a>, Serunjogi and Moujaled held out.



Serunjogi focused on driving Chipper as fast as possible–one way he tried to do that was by keeping the board small. Though he insists he has a large group of advisors, Chipper only had (and still has) just three voting board members: Serunjogi, Moujaled and Dan Kimerling, who runs fintech-focused venture capital firm Deciens. Similar-stage startups usually have five or more. “At the early stage of a business, the founders’ vision still has a premium. You&#8217;re trying to execute on something you uniquely see,” Serunjogi says.



By mid-2022, Serunjogi wanted to slow down expansion, but he concluded Chipper had already progressed so far on some projects that it would be too costly or wasteful to abandon them. One example: The company had already done much regulatory legwork to launch money transfers simultaneously in 10 new nations, each with its own set of legal requirements. So it charged ahead anyway with the big rollout over a two-week period in the fall of 2022.



When asked whether he chases too many goals at once, Serunjogi says, “If you set a goal of 10 versus a goal of 100, you will get to 9 out of 10, and you&#8217;ll get to 90 out of 100 … I strongly believe in setting stretch goals–that has been my style.”



Chipper hired about 150 employees in 2022, hitting almost 450 at its peak size. It spent aggressively on marketing, paying spokespeople like&nbsp;<a href="https://www.youtube.com/watch?v=SqkjPTzP_6Y" target="_blank" rel="noreferrer noopener">Burna Boy</a>, Africa’s most streamed artist, to appear in ads. Within the fintech industry and in Africa, Chipper was gaining attention. In the middle of last year,&nbsp;Forbes&nbsp;published an article chronicling&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/06/06/how-two-africans-overcame-bias-to-build-a-startup-worth-billions" target="_blank" rel="noreferrer noopener">Chipper’s founding story and fast growth</a>.



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When crypto exchange&nbsp;FTX collapsed suddenly last November, the mood inside Chipper grew much darker, former employees say. Sam Bankman-Fried’s company had been a major investor in Chipper’s 2021 mega funding round, and staffers found the situation deeply unsettling. It also exacerbated the bear market for the digital asset industry and dampened interest in something that had been helping Chipper attract new users: crypto investing.



With marketing efforts drastically reduced, Chipper saw its number of active users shrink in 2022, according to a former employee, and though it had more than five million registered users, only about one million of them were engaging with the app monthly, the company says. Serunjogi admits Chipper has seen a dip in usage and attributes it to Chipper’s raising prices on money transfers and other features to focus more on profitability. He says that new-user signups and “people who use multiple products” still “continue to fare quite well.”



Chipper will soon start offering U.S. dollar-denominated accounts to African customers to try to entice more users. Serunjogi says receiving international payments has been one of the most requested features, particularly for freelancers earning a living online. While crypto was once a major growth driver for Chipper, the startup seems to be going back to basics. “We’re essentially giving anyone access to one of the most trusted currencies in the world,” he says.



On top of spiking interest rates and a dormant funding market, Chipper has been facing another macroeconomic headwind: the naira, Nigeria’s currency that Chipper needs to hold to enable customers’ money transfers, has dramatically declined in value. It had been falling since early 2020, and in the second half of 2022 it lost another 8%, ultimately contributing to a negative gross profit margin for Chipper, an unusual financial profile for a company of its size. Today Serunjogi says Chipper has a positive gross margin.



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When the fintech market&nbsp;recovers from its deep downturn, entrepreneurs’ approaches to layoffs will likely turn out to have had a major impact on startups’ survival and trajectory. At Chipper, Serunjogi and Moujaled have done at least five sets of layoffs over the past 13 months. Judging by the frequency and increasing depth of the cuts compared with those of other major fintechs, Chipper waited too long to get lean.



“Layoffs were agonizing decisions. That is the stuff that kept me up at night,” Serunjogi says. “It’s like a piece of your humanity dies … Imagine having a conversation with people who you really like, who are very good, who made sacrifices for the business to be where it is today. They depend on that income. And you tell that person, ‘I have to cut you.’ And they have a family to look after.”



Why didn’t he opt for a smaller number of deeper cuts to get them over with faster? “These are human beings we’re talking about,” he says. “If I can save someone&#8217;s job, I&#8217;m going to try to find a way to save it until clearly it doesn&#8217;t make sense to be saved.” He adds that some international rules require companies to do layoffs over a period of three months, which drags out the process.



Some former Chipper employees think Serunjogi has botched the communication of bad news over the past year. For instance, after layoffs began, workers started asking questions about revenue and how much cash was left in the bank at company-wide meetings. Serunjogi often responded to the effect of, “Why do you guys keep asking this? You don’t need to know,” according to a former employee. Another staffer felt Chipper became a “very secretive environment.”



“We have various responsibilities and confidentiality we have to maintain in running a business,” Serunjogi says. “In all our all-hands meetings we used to show revenue, revenue growth by product, et cetera–until people started leaking it. We would start to see these things showing up in the press,” he says, chuckling.



He started to believe employees felt too entitled and weren’t taking their jobs seriously enough. That led him to remove the “lead with empathy” corporate value–he thought people were using it to excuse mediocre performance. Chipper replaced it with “be customer obsessed.”



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Don’t mistake the early successes we’ve had with ‘we’ve made it.’ No, we can still die.”— Ham Serunjogi
</blockquote>



“If you make a mistake, I have to come down hard on you, because the consequences for all of us are that much greater [at a startup],” Serunjogi says. “Don’t mistake the early successes we’ve had with ‘we’ve made it.’ No, we can still die.” He admires Bill Gates for working all the time and not taking vacation during Microsoft’s early days, and he appreciated&nbsp;<a href="https://www.forbes.com/sites/edwardsegal/2022/11/17/elon-musks-ultimatum-to-twitter-employees-ramps-up-companys-crisis/">Elon Musk’s November 2022 ultimatum to Twitter employees</a>&nbsp;that staying at the company would require “extremely hardcore” work and long hours.



In the spring of 2023, some employees began saying Chipper had just ten months of cash left in the bank, with one posting it in&nbsp;<a href="https://www.glassdoor.com/Reviews/Employee-Review-Chipper-Cash-RVW75333016.htm" target="_blank" rel="noreferrer noopener">a Glassdoor review</a>. People inside the startup were asking how it could have blown through the $300 million it raised, according to a former engineering manager.



Regarding Chipper’s rumored short runway, “I genuinely don&#8217;t know why and who would say something like that,” Serunjogi says, expressing frustration that anyone would discuss internal company matters publicly. “We have a tremendous amount of money on our balance sheet, so we’re fine,” he told us in late May.



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Serunjogi doesn’t like talking&nbsp;much about the specifics of what he would have done differently if he could do it all again. When asked the question multiple times, he told us, “We are laying the foundation for what is going to make us successful over the next 10 or 20 years. I obsess less about what was happening in the last six months or three months or 12 months.” He concedes there are many things he’d do differently but demurs from spelling them out and says, “We are one of the most successful companies in Africa.”



What is clear: Chipper has cut nearly 175 people and scrapped plans to expand into Europe and the Middle East for now, since entering a new country takes months of work–it requires hiring lawyers and consultants and sometimes staffing at least 10 people in a new nation. It has refocused on Africa, cutting many U.S. employees who sit thousands of miles away from its customers. Serunjogi plans to hire fewer than 50 people this year. The marketing budget has been “meaningfully scaled back,” Serunjogi says, and he claims the company is “about to be profitable.”



Somehow, when asked to reflect on the past year, the young entrepreneur always comes back with a positive spin. “What we’ve achieved so far–if I went back and started the whole thing again, I would be very happy to come back to that same exact point.”

Ham Serunjogi and Maijid Moujaled by Ethan Pines for Forbes 130L-03-0027

Inside Chipper Cash’s Grueling Battle To Survive The Fintech Winter

An in-depth look at investment in some of the continent’s most promising entertainment industries reveals areas of growth, challenges and what the future might hold.



Africa’s heartbeat is in rhythm with the passion, culture and creativity of its people. On a continent of 1.4 billion people according to estimates by the United Nations (UN), there are effectively 1.4 billion stories to tell, each one unique and brimming with potential.



The question is: what is the narrative, and who is telling the story? 



Africa’s prospects in creative industries like art, fashion, film and television, crafts and architecture, among others, are well-documented. An oft-quoted fact comes from the United Nations Educational, Scientific and Cultural Organization’s (UNESCO) 2021 report African Film: A Booming Industry. It illustrates the potential in the film and audio-visual industries, which could result in generated revenue of $20 billion per year.



Speaking on the outlook for entertainment and media in Africa over the next few years, Charles Stuart, PricewaterhouseCoopers (PwC) South Africa’s Entertainment and Media Partner, says to FORBES AFRICA:



“We look at consumer spend in terms of what’s covered from a cinema perspective. [It] is growing; it’s just taking longer to recover to where it initially was. Is cinema dead? No, we are not seeing that.”



But where is investment for this forecasted to come from? With the growth of video-on-demand (VOD) and over-the-top (OTT) services, and a burgeoning appetite for authentically African media and content, venture capital (VC) is poised to be at the forefront of development on the continent, for film and television in particular.



<h4 class="wp-block-heading has-text-align-center" id="h-show-me-the-money-jerry-maguire-1996">“Show Me The Money” (Jerry Maguire, 1996)</h4>



The African Private Capital Association (AVCA) indicates that 58 private capital investments, with a total reported value of $346 million, were recorded in Africa’s creative industries over the last decade (2012-2022).



“Starting from a low base of only four investments in 2012, private capital investments in Africa’s creative industries more than tripled, reaching a total of 13 in 2022,” says AVCA.



Notably, VC investments attracted the largest share of these. They accounted for about 67% of the total number over the 2012-2022 period, followed by private equity investments at 33%.



<div class="wp-block-media-text alignwide is-stacked-on-mobile" style="grid-template-columns:36% auto"><figure class="wp-block-media-text__media"><img loading="lazy" decoding="async" width="429" height="522" src="https://cms.forbesafrica.com/wp-content/uploads/2023/08/venture-capital-1.png" alt="" class="wp-image-59059 size-full" srcset="https://cms.forbesafrica.com/wp-content/uploads/2023/08/venture-capital-1.png 429w, https://cms.forbesafrica.com/wp-content/uploads/2023/08/venture-capital-1-247x300.png 247w" sizes="(max-width: 429px) 100vw, 429px" /></figure><div class="wp-block-media-text__content">
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“WE LOOK AT CONSUMER SPEND IN TERMS OF WHAT’S COVERED FROM A CINEMA PERSPECTIVE. [IT] IS GROWING…
<cite>Charles Stuart, Entertainment and Media Partner, PwC South Africa</cite></blockquote>
</div></div>



“These investments spanned various sectors, including the development of online gaming platforms, music and video streaming developers, operators of music websites, live broadcasting, film streaming platforms, providers of advertising and marketing services, and clothing designers, among others,” says AVCA.



Jeff Schlapinski, Managing Director, Research, at non-profit, independent membership organization, Global Private Capital Association (GPCA), echoes these sentiments. 



“Africa’s VC investments in media and entertainment companies reached $31.2 million across six rounds in 2022, a new record in terms of deal value.”



However, Schlapinski notes that investments into this sector have, historically, represented a very small percentage of investment activity in Africa’s venture ecosystem (~1% of the $2.75 billion invested in VC in Africa in 2022, according to GPCA).



“The significant growth of the venture capital asset class in recent years, along with the increased allocation of capital towards technology or technology-enabled businesses, has contributed to the growth of investments in this sector as well,” says AVCA.



<h4 class="wp-block-heading has-text-align-center">Economies In The Spotlight</h4>



According to AVCA, the increase in the number of investments in Africa’s creative industries strongly indicates investors’ increasing interest and recognition of the sector’s potential. A handful of countries attracted the biggest chunk of that investment over the 10-year period (2012-2022).



“In terms of their geographic distribution, South Africa has attracted the largest share of private capital investments in Africa’s creative industries at 24%.” Following South Africa is Egypt, accounting for 14% of these investments. The country has also emerged as a significant technology hub on the continent in recent years.



“Nigeria and Kenya, two of Africa’s largest private capital markets, have each accounted for 10% of these investments,” says AVCA. Speaking on 2022, in particular, Schlapinski notes that the markets that led VC investments in media and entertainment – in terms of deal value – were South Africa with $22.5 million, Nigeria with $5.7 million and Egypt at $2 million.



They represent three of the four most active countries for overall VC investment with Kenya rounding off the top four.



<h4 class="wp-block-heading has-text-align-center">The Redefinition Of Main ‘Stream’</h4>



Regarding three of sub-Saharan Africa’s emerging economies, namely South Africa, Nigeria and Kenya, streaming service, Netflix, released its Socio-Economic Impact Report earlier this year, where it reveals its impact since entering the market.



Over the 2016–2022 period, it invested $175 million in content and in the overall creative environment in these countries specifically.



South Africa received the bulk of this investment, accounting for at least $125 million. In addition to that, over the same period, it invested in upwards of 425 licensed titles in these economies, further opening up the market to a host of proudly African films and television series.



Expanding on PwC’s outlook for Africa, Stuart says that success for OTTs necessitates an understanding of the type of content you put out there.



“You can have a wonderful distribution platform [but] if you’ve got nothing good to show – which is part of cinemas’ challenges over the last while; some of those big titles and also the lack of big titles has worn out in terms of what we’re seeing.”



He emphasizes the fact that content is always going to be king.



“Coming back to Africa, the culture and the richness and the heritage that we have, if you drive around, you’ve got Shaka [iLembe], there’s Rosemary’s Hitlist (both documentary series) advertised on billboards. You’re seeing the importance of local content to the success of your streaming platforms. Initially, when a Netflix entered Africa, it didn’t do really well. All it was doing is, ‘here’s the international content’. People were familiar with it but we like our African stories as well,” says Stuart.



With streaming platforms, the cost base is mostly fixed, so, in reality, he says that it’s the subscriber base that drives the growth.



“How do you really translate things into profit? It’s getting more people to subscribe to your service. What they were lacking a lot in the early days was this local content – that really resonated with it. What many of the streamers have learned is that it is about finding that balance between your international content, supplemented with your local content. When you look at a lot of the communication coming out of Apple, Netflix, Amazon, there’s continued communication around the fact that they are investing in local content.”



Stuart adds, “There’s still opportunity for your local players but it’s not an easy industry. For every bit of content that ends up on Netflix, there’s probably 10 pieces of content that doesn’t end up on Netflix.”



<h4 class="wp-block-heading has-text-align-center">A Continent Up For The Challenge</h4>



The African Export-Import Bank (Afreximbank) recently took an in-depth look at the continent’s Culture and Creative Industries (CCIs) in its African Trade Report 2022: Leveraging the Power of Culture and Creative Industries for Accelerated Structural Transformation in the AfCFTA Era.



It noted that some of the obstacles hindering the growth of CCIs include policy frameworks, finance, infrastructure, intellectual property rights, standards and norms in the area of cross-border trade, accurate data, language barriers, colonial legacy and an extroverted model.



Furthermore, it states that “a positive outcome of the pandemic has been the necessitated shift to digital solutions and online streaming, which has helped boost the performance and resilience of creative industries underpinned by digital models and platforms”.



While Africa does have its fair share of challenges, PwC’s Africa outlook for 2023-2027, which is expected to be released in September, sheds light on infrastructure investments, particularly in the telco space, which has a fundamental impact on streaming platforms, data consumption, and the growth of mobile gaming on the continent.



<div class="wp-block-media-text alignwide is-stacked-on-mobile" style="grid-template-columns:39% auto"><figure class="wp-block-media-text__media"><img loading="lazy" decoding="async" width="333" height="420" src="https://cms.forbesafrica.com/wp-content/uploads/2023/08/venture-capital-2.jpg" alt="" class="wp-image-59060 size-full" srcset="https://cms.forbesafrica.com/wp-content/uploads/2023/08/venture-capital-2.jpg 333w, https://cms.forbesafrica.com/wp-content/uploads/2023/08/venture-capital-2-238x300.jpg 238w" sizes="(max-width: 333px) 100vw, 333px" /></figure><div class="wp-block-media-text__content">
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“AFRICA’S VC INVESTMENTS IN MEDIA AND ENTERTAINMENT COMPANIES REACHED $31.2 MILLION ACROSS SIX ROUNDS IN 2022, A NEW RECORD IN TERMS OF DEAL VALUE.”
<cite>—Jeff Schlapinski, Managing Director, Research, GPCA</cite></blockquote>
</div></div>



“For the first time, in this year’s entertainment and media outlook, there’s a telco outlook that has gone with it. One of the aspects that has been covered as part of that telco outlook this year is telco capex spend – how much are the telcos actually looking to spend from a capex perspective in the various markets,” says Stuart.



A glance at the numbers in the assurance, tax and advisory services provider’s Perspectives from the Global Entertainment &amp; Media Outlook 2023–2027: Resetting expectations, refocusing inward and recharging growth for the three aforementioned sub-Saharan African regions seems to indicate an appetite for investment. This includes the convergence of the creative and technology industries.



“When we look at capex spend – and there is some further breakdown in terms of broadband, mobile broadband – in Kenya in 2022, there was $470 million worth of spend in the capex space and that’s going to grow each year at around 2.2%. By 2027, telcos are forecast to be spending around $520 million on their capex infrastructure in Kenya. The vast majority of that – about 85% – is going to be in the mobile space. That probably comes as no surprise given the strong mobile- first characteristics that the market has.”



Stuart adds: “Nigeria is going to be spending more than three times that, so almost $2 billion by 2027. There is a lot of investment in Nigeria. You’ve got your big players – Glo, MTN – they’ve been spending in terms of upgrading the network. They’re already sitting at about



$1.8 billion and it’s going to be a bit above and below that over the forecast period; fairly consistent with that level. Again, the vast majority of that is sitting in the mobile space. South Africa is spending $1.6 billion and that’s actually going to drop a little bit over the forecast period. It makes sense in a way because a lot of the 5G stuff is already in progress. There’s a lot of spend happening at the moment but over time, that does mean it will slow down.”



Data consumption is expected to continue its increase, leaving telcos with solutions to find from an economic and infrastructure perspective. “The challenge that telcos and, particularly, the content providers have is the monetization of that because [it’s] very expensive to upgrade this. There’s obviously downward pressure on data prices but money needed to be spent to upgrade the infrastructure to cater for the increasingly data-heavy world that we live in.



About 80% of data consumption is sitting in the video space, and there are various other categories around communications, music etc. Does it mean that people are watching more than listening to music? Not necessarily. Video [is] just much more heavy from a data usage perspective,” says Stuart.



<h4 class="wp-block-heading has-text-align-center">African, Tech Savvy &amp; Proud</h4>



Another notable point in the report is the impact of the continent’s youth on the growth of the mobile gaming sector.



“The fastest growing segment of video games we’re seeing is in what we call casual and social gaming. That’s your Candy Crush, it’s mobile games that people either play on a free-to-play model or ‘freemium’ where it’s free to start but then you might start paying for things down the line. A lot of that is also funded potentially through advertising that appears in those games so that’s where a lot of that growth is coming from,” says Stuart.



These developments have also opened up an emerging avenue in the cinema space and he adds that this could create opportunities in emerging economies that are primarily tech and mobile-focused.



“Video games are seen as one of the access points to the youth. [They] engage in it and we’re seeing things expanding. During Covid, the Fortnite platform, which people access from a video games’ perspective was used to host music concerts – Travis [Scott], I think, was who appeared on the Fortnite platform and had thousands and thousands of people watching his show, whereas you previously wouldn’t have seen it. There’s a bit of multi- functionality within the video games space.



“What we are seeing in the cinema space is interesting. We’ve always had, traditionally, other sorts of areas like Lego, and then you’ve got Lego: The Movie. We are now starting to see video games that have movie titles and movie franchises attached to them. Why? Because you’ve got this audience that’s already engaged with your content in the video games space and how do you try and stay engaged with them but in a different media format? It could be a series on OTT or it could be an actual big screen film. Maybe that’s some sort of element of opportunity within Kenya and Nigeria – as video games continues to grow, that could help to spur some growth as that content is repackaged into the cinema space,” Stuart concludes.

singer on stage with crowd reaching for him

Where Does Venture Capital Feature In Africa’s Entertainment Sector?

​​The Securities and Exchange Commission is suing Binance, the world’s largest cryptocurrency exchange, its U.S. affiliate and founder Changpeng Zhao.



Among the reams of evidence provided by the agency, which include employee text messages, testimonies of former executives and Binance’s audit reports, some accusations seemed especially bizarre. Here are five that caught our eye:



<h2 class="wp-block-heading" id="h-the-former-chief-compliance-officer-said-there-s-no-fking-way-we-are-clean">The former chief compliance officer said “there’s no fking way we are clean”</h2>



In a&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.17.5_1.pdf" target="_blank" rel="noreferrer noopener">text exchange</a>&nbsp;with another employee, Binance’s former chief compliance officer, Samuel Lim, said he did not believe the company was “clean.” As an example, he said that the exchange’s customer service is teaching users how to circumvent sanctions.



<h2 class="wp-block-heading" id="h-binance-is-accused-of-hijacking-more-user-funds-than-ftx">Binance is accused of hijacking MORE user funds than FTX</h2>



The SEC alleges Binance and Binance.US&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.21.0_2.pdf" target="_blank" rel="noreferrer noopener">redirected</a>&nbsp;over $12 billion in clients’ assets to entities controlled by Zhao between 2019 and 2021. That’s $4 billion more than the $8 billion shortfall initially claimed in the case of FTX, formerly the second-largest crypto exchange and the subject of a spectacular collapse in November. Additionally, millions of dollars of customer and corporate funds were commingled in accounts of Merit Peak, a British Virgin Islands trading firm owned by Zhao, according to the agency.



In a&nbsp;<a href="https://twitter.com/cz_binance/status/1666848861497831449?s=20" target="_blank" rel="noreferrer noopener">Twitter post on</a>&nbsp;Thursday, Zhao denied the claim but only addressed the Binance.US part of the allegation. &#8220;To the best of my knowledge, Binance.US had in total roughly $2 billion in user funds. This number in USD equivalent fluctuates a little as crypto prices change. And declining as users withdraw due to recent news. All user funds are accounted for, and never left the Binance.US (unless users withdraw themselves of course), ever.&#8221; he wrote.



<h2 class="wp-block-heading" id="h-binance-received-damning-audits">Binance received damning audits</h2>



Since Binance.US’s inception and through at least 2022, auditors from Armanino have&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.20.8.pdf" target="_blank" rel="noreferrer noopener">identified</a>&nbsp;“significant deficiencies that aggregated to material weaknesses” relating to Binance’s control over the operation of the Binance.US Platform and custody and control of customer assets, and the fact that Binance’s custody of U.S. customer assets was completely opaque” to employees of BAM Trading, Binance.US’s operator. Drawbacks listed in the 2019 audit included commingled customer and company funds, reliance on the parent for financial data and the lack of a disaster plan.



A separate&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.19.10_1.pdf" target="_blank" rel="noreferrer noopener">audit</a>&nbsp;from FGMK shows that Binance.US lost $181 million in 2022.



<h2 class="wp-block-heading" id="h-two-former-ceos-of-binance-us-claimed-that-zhao-ran-the-american-unit">Two former CEOs of Binance.US claimed that Zhao ran the American unit</h2>



Brian Brooks, former chief executive of Binance.US who resigned three months after taking the job,&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.20.3.pdf" target="_blank" rel="noreferrer noopener">said</a>&nbsp;that “what became clear to me at a certain point was CZ was the CEO of BAM Trading, not me.” Binance has maintained that it operates independently from its American affiliate.



Brooks added that during his tenure Binance.US had a group of Shanghai-based employees who received part of their compensations in Binance’s BNB<a href="https://www.forbes.com/digital-assets/assets/bnb-bnb/" target="_blank" rel="noreferrer noopener">BNB</a>&nbsp;<a href="https://www.forbes.com/digital-assets/assets/bnb-bnb/">+0.9%</a>&nbsp;token and were part of a company called “Boran.”



Catherine Coley, the first chief executive of Binance.US–who abruptly left the company in 2021 and has been little heard from since– also revealed the subsidiary was not independent. The SEC alleged that for at least the first year of its existence, the parent company Binance.com insisted that Zhao and Guangying Chen, a close associate of Zhao also known as Heina, had to control the bank accounts of BAM Trading, the U.S. exchange. Coley&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.18.16_1.pdf" target="_blank" rel="noreferrer noopener">told</a>&nbsp;company lawyer Wei Zhou in an electronic exchange: “I’m confused why we go through all of these measures with separating BAM vs. .com and then have a non-U.S. resident, non employee on the bank applications.” Zhou replied “You know what HQ Finance’s position is, right?… They want to have Heina as signatory on US BAM bank accounts”



He advised: “No need to pound the separation thing too much. I think most people understand that by now.”



Coley dubbed an effort to escape Zhao’s control as “Project 1776,” a reference to the American Revolution. She told a fellow employee it was “for our independence,” according to the suit.



<h2 class="wp-block-heading" id="h-wash-trades-occurred-with-employees-knowledge">Wash trades occurred with employees’ knowledge</h2>



The SEC&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.1.0.pdf" target="_blank" rel="noreferrer noopener">alleges&nbsp;</a>that wash trading, or self-dealing, which typically results in an inflated trading volume that creates a false appearance of market interest, regularly took place on the Binance.US platform. Much of it occurred through accounts affiliated with Sigma Chain, an entity owned and controlled by Zhao, essentially making it a market maker on the Binance.US Platform.



In an online discussion in January 2021 about a drop in trading volume from Sigma Chain, the company&#8217;s sales director&nbsp;told other employees that 20 other accounts were fronts: &#8220;fyi, these are ALL sigma chain.&#8221; Later that month, an employee found he could trade with himself.



The SEC’s 13-count&nbsp;<a href="https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf" target="_blank" rel="noreferrer noopener">suit</a>&nbsp;alleges that the crypto exchange, its American branch and Zhao “enriched themselves by billions of dollars while placing investors’ assets at significant risk” and “designed and implemented a multi-step plan to surreptitiously evade U.S. laws.”



Binance.US&nbsp;<a href="https://twitter.com/BinanceUS/status/1666996908651323393" target="_blank" rel="noreferrer noopener">said</a>&nbsp;late on Thursday that it would suspend deposits and withdrawals in U.S. dollars on its platform. In a message to customers, the company said it was “taking necessary actions” in a transition to a crypto-only exchange after the SEC suit discouraged banks from working with it



Zhao, Binance and two U.S subsidiaries have until June 28 to <a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.23.0.pdf" target="_blank" rel="noreferrer noopener">respond</a> to the suit, which was filed in the federal court for the District of Columbia. A hearing on an SEC request to freeze the assets of Binance.US is set for June 13 at 2:00 PM Washington time.



<a href="https://www.forbes.com/sites/ninabambysheva/"></a>

SEC Targets $120 Billion of Tokens With Coinbase And Binance Suits

5 Most Surprising Revelations From The SEC’s Binance Lawsuit

As bank failures rattle investors and test regulators, it&#8217;s time to rethink America’s financial system. One old solution, despised by regulators, might be just what the doctor ordered.



<abbr>N</abbr>estled on the&nbsp;second floor of a suburban office building in Fairfield, New Jersey, not far from Interstate 80 and just down the hall from an opthalmology center, are the offices of Financial Northeastern. Its chief executive, Jeff Zage, 60, could be one of the saviors of the troubled $23 trillion U.S. banking industry. Zage is a money broker, and for the past 38 years, his firm has specialized in underwriting certificates of deposits for needy banks. These deposits are generally bank-run-proof—they are not redeemable prior to maturity unless the deposit holder dies or becomes mentally incapacitated. Over the last 12 years, Zage’s small firm has quietly raised some $150 billion for banks small and large, connecting them with business owners, municipal treasurers and wealthy individuals eager to park sums of $250,000 or less in FDIC-insured accounts around the nation. Thanks to the Federal Reserve, interest rates on CDs maturing from three months to ten years are now above 5%. That means business is good for Financial Northeastern, which makes a small fee on each CD it brokers. But Zage repeatedly demurs when&nbsp;Forbes&nbsp;asks him for a photograph or even just a face-to-face meeting.



“I am a very unassuming individual,” he says. “I try to do my best to stay under the radar.”



Thirty-six years ago, it was a different story. Zage—then just 24 years old—his older brother Steven and their team of young cold-calling brokers were making millions providing funding to the nation’s ailing $1.2 trillion savings-and-loan industry in the form of high-rate CDs. A 1987&nbsp;Forbes&nbsp;article headlined “WE’RE THE LIFEBLOOD” pictured Zage popping out of the sunroof of his new car, his brother reclining on the hood. The story chronicled how regulators at regional Federal Home Loan Banks were calling brokers such as Financial Northeastern and Merrill Lynch to funnel billions to prop up zombie thrifts, mostly in Texas. Those S&amp;Ls had gotten into deep trouble after newly deregulated deposit rates soared by investing in commercial real estate, junk bonds and other risky assets.



When the dust settled, 747 savings-and-loans were shuttered and FSLIC, the insolvent government insurance fund backstopping the industry, was absorbed into the FDIC. The debacle cost U.S. taxpayers $124 billion, about $300 billion in current terms, or the equivalent of 2% of America’s 1989 GDP. Money brokers were blamed for worsening the S&amp;L crisis. Pundits called them a “cancer” afflicting the system because they peddled “hot money” that surged in and out of banks chasing the highest yield. In 1991, new regulations enacted by the FDIC made Zage’s bread-and-butter product, so-called brokered deposits, practically toxic to banks. Regulators warned against using them and increased FDIC insurance premiums for those who did. Today few of the nation’s 4,700 banks hold significant amounts of them.



But perhaps they should.



Silicon Valley Bank didn’t have a single brokered deposit on its books on March 9, the day depositors withdrew $42 billion in just 10 hours. Hot money? Sure—but it’s all hot these days. SVB’s $1 million-per-second deposit run was sparked by a handful of tweets. Dozens of fintechs, including Chime, Mercury and Robinhood, are more than happy to assist you with fast, frictionless money transfers. When Apple, backed by Goldman Sachs, announced in mid-April that it was offering an FDIC-insured savings account yielding 4.15%, it sucked in nearly $1 billion in four days. Non-banks, in the form of money market mutual funds like those offered by Vanguard and Fidelity, love hot money too. According to the Federal Reserve, over the last 13 months, $1 trillion in deposits has fled commercial banks for higher-yielding uninsured accounts.



Despite their pejorative “hot money” nickname, Zage’s FDIC-insured brokered CDs are far stickier than any of these bank savings accounts. Plus, there is strong evidence from a niche group of so-called industrial banks, which are in stellar financial condition while relying heavily on this funding, suggesting that this sort of heat is a stabilizing force. But brokered CDs alone won’t cure what’s ailing our nation’s banking system. The fact that after 40 years they continue to be stigmatized by regulators—and consequently shunned by banks—points to a larger problem. Bank regulation, with its multiple state regulators and three primary federal watchdogs—the Federal Reserve, the FDIC and the Office of Comptroller of the Currency—is stunningly inefficient, laden with political baggage and miles behind a quickly changing marketplace.



Part of the problem comes from clinging to old-fashioned banking ideals like “core” deposits, thought to be foundational to community banking and the soundness of our system. SVB and First Republic were far from the only banks caught flat-footed when the Fed hiked rates 10 times in the last year. According to FDIC call report data, 31 FDIC-insured banks with total assets of $30 billion are sitting on losses in their securities portfolios in excess of their tier 1 capital&nbsp;(see “Underwater on Main Street,” below).&nbsp;And that’s just the ugliest tip of the iceberg. Nearly 400 banks with combined assets of more than $3.7 trillion have losses amounting to more than half of their tier 1 capital. Virtually all these institutions are local community banks, most with assets of less than $300 million. Fortunately, few of these sick minnows are likely to have lots of uninsured deposits exceeding $250,000—or the external pressure of being publicly traded like Silicon Valley Bank and First Republic.



“In light of recent bank failures, the question is really not whether we need to rethink what a brokered deposit is or what hot money is, but what is a core deposit anymore?” says Jelena McWilliams, former chair of the FDIC and now a managing partner at Washington, D.C., law firm Cravath Swaine &amp; Moore. “Long-term, the community banking model will have to change. These small banks basically cannot survive unless they engage in fintech partnerships because it’s an easier and less costly business model to attract customers. But for whatever reason, the regulators in Washington are very averse to fintech.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<abbr>S</abbr>upport for&nbsp;community or “Main Street” banking dates to the founding of the republic, when populist Thomas Jefferson squared off against federalist Treasury Secretary Alexander Hamilton, an elitist who wanted to create a national bank. Jefferson believed it was unconstitutional and a threat to the young democracy, in part because it would concentrate funding in the big cities and away from small, developing agrarian communities. Hamilton prevailed in 1791 with the establishment of the first central bank, but in 1811, Congress failed to renew its charter. It wasn’t until 1863, when the Union needed to finance the Civil War, that the national banking system was created.



This historic bias enabled small-town banks to proliferate, and by 1929 there were nearly 26,000 banks in the U.S., one for every 5,000 Americans. The stock market crash and Great Depression sparked a blizzard of bank runs on these often-undercapitalized institutions: In the four years before the FDIC was established in 1933, nearly 6,000 U.S. banks and savings institutions failed, costing depositors $1.3 billion, about $31 billion in today’s dollars.



Ever since, the number of community or “Main Street” banks has been shrinking. There are currently 4,676 FDIC-insured banks, but on average 200 of them are merged out of existence each year. Dwindling numbers have done little, though, to weaken the strength and resolve of small banks’ primary lobbying group, the Independent Community Bankers of America (ICBA), which spent nearly $4.8 million lobbying in 2022, according to Open Secrets, including about $1.3 million in donations spread around Congress, the largest chunk to the House Financial Services Committee. The ICBA’s stated goal is to “keep money local and invest in communities.”



“They’re politically powerful because they’re on every single corner,” says bank consultant Mayra Rodríguez Valladares. “There’s actually rare bipartisan support for community banking.”



Adds former FDIC chairwoman McWilliams, “There is a strong sense in Washington that these small banks matter. Large banks don’t understand local conditions where a loan may have originated in the past based on ‘I’ve known your grandfather. He was a man of his word, and I trust that you’re going be the man of your word.’ [The ideal] is Norman Rockwell–esque.”



The ICBA asserts that big Wall Street banks are transactional, making decisions based on “predetermined credit boxes,” while community banking boils down to relationships. Of course, this is largely nonsense. Small banks use—or should use—precisely the same metrics in evaluating creditworthiness that larger ones do. There is no evidence of any bank of any size in the year 2023 making a loan because it “knew your grandfather.” On the flip side, in many ways, Silicon Valley Bank, with its $212 billion in assets, was practicing community banking.



“SVB was built exactly the way the regulators say a bank should be built: customer by customer, relationship by relationship. No hot money,” says bank regulatory expert Paul Clark of Seward &amp; Kissel. “Everything was ‘You want a line of credit from me, you keep your deposits here.’ Those are so-called core deposits.”



Moreover, because regulators were never especially precise in their definition of core deposits, except for the fact that brokered deposits should mostly be avoided, clever entrepreneurs and financial institutions over the years have figured out ways around the prohibitions and FDIC insurance limits.



In 2003 an Arlington, Virginia, company called IntraFi launched a deposit swapping service called CDAR (Certificate of Deposit Account Registry), which allowed banks to offer wealthy customers and businesses the ability to deposit up to $50 million. The big deposits are chopped up into $250,000 increments and placed at various FDIC-insured banks in IntraFi’s network. Banks that accept the deposits are then able to place their own over-the-limit deposits through the network.



“For me it’s being able to retain multigenerational customers that have accounts that will exceed the $250,000 limit,” says Jill Castilla, president of Citizens Bank of Edmond, Oklahoma, which has deposits of about $330 million, 18% of which are “reciprocal” thanks to IntraFi. “So now they don’t have to manually place those funds in different institutions to ensure they have coverage.”



Citizens’ $58 million in reciprocal deposits is not considered brokered by the FDIC but instead fall under the “core” deposit designation. Likewise, if you’re a bank that advertises your CD rates online using services like Bankrate, NerdWallet or Forbes Advisor, the high-rate deposits you bring in from across the nation typically qualify as “core.”



Then there are the multiple, and often confusing, brokered deposit “exemptions” granted by the FDIC to various banks, including those working exclusively with fintechs. FDIC-insured $1.8 billion (assets) Evolve Bank &amp; Trust of Memphis, Tennessee, provides banking services for large fintechs like Dave, Affirm and Mercury, but shows only 0.3% of its deposits are brokered.



Sourcing deposits outside your home market is apparently okay with regulators so long as you avoid broker-dealers like Zage, or UBS, Bank of America or Wells Fargo. Iowa’s Luana Savings Bank, a 115-year-old family-owned bank located in a town of 300 people amid thousands of acres of cornfields, found this out the hard way.



From 2016 to 2020, Luana’s assets more than doubled to $1.7 billion as its ambitious president, David Schultz, became one of Iowa’s biggest agricultural lenders. Luana and its six small branches were unable to attract enough local deposits to fuel its growing business, so Schultz connected with brokers that allowed him to fund his loans with out-of-market CDs with similar maturities. As assets climbed toward $2 billion, brokered deposits accounted for 60% of the total.



Luana’s operating stats have been exemplary, its return on equity averages 19% and it was a perennial winner of Des Moines–area “best bank” awards. Still, alarm bells sounded at the FDIC regional office, and in 2021, it and the Iowa Superintendent of Banks issued a cease-and-desist order claiming Luana was taking “excessive” risks and operating in an “unsafe and unsound” way. It also fined the bank $14.5 million and cut off its access to Federal Home Loan Bank loans. Schultz, who declined to speak to&nbsp;Forbes,&nbsp;told the&nbsp;Des Moines Register&nbsp;at the time that the charges were manufactured, and sued the FHLB.



Ultimately Schultz decided fighting regulators wasn’t worth it, so without admitting or denying the charges, Luana signed a consent order in 2022 and agreed to add independent directors to its board and reduce its reliance on non-core deposits.



<abbr>A</abbr>mong banks,&nbsp;the biggest users of brokered deposits are a small group of FDIC-insured institutions known as industrial banks. There are 24 of them, representing only $250 billion in total assets, but they are extremely well capitalized and profitable&nbsp;(see “Industrial Strength,” below).&nbsp;They are also despised by the ICBA and the Federal Reserve, and barely tolerated by their regulator, the FDIC.



Sometimes referred to as industrial loan companies (ILCs), these banks are FDIC-insured and -regulated, but their parent companies are typically commercial or financial institutions. The first ILC was formed in 1910 to make loans to industrial workers who couldn’t obtain credit elsewhere. Over the years companies like General Electric, Target and Goldman Sachs have owned ILCs. Today their owners include Harley-Davidson, Pitney Bowes, UnitedHealth Group, BMW, Square and USAA. Only a few states, including Utah, Nevada and California, can authorize their charters, and though they’re subject to the same rigorous FDIC application process and examinations as other banks, they’re exempt from Federal Reserve oversight because their parent companies, which are required to support their ILC with capital, aren’t bank holding companies.



Industrial banks can offer savings accounts, credit cards, loans and mortgages, but are prohibited from offering checking accounts or financing their parent company’s products. Pitney Bowes Bank, for example, doesn’t make loans to purchase its postage meter machines, but it can finance and manage shipping payments for its thousands of small-business customers. Industrial banks tend to be specialized and branchless, which is why many rely heavily on brokered certificates of deposit for funding, which they use to match asset maturities.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



One of the most profitable and well-capitalized banks in the nation, Nevada-chartered Beal Bank USA, is an industrial bank owned by Texas billionaire Andy Beal. It has $32 billion in assets and, as of March 31, 93% of its deposits were brokered. It’s currently offering one-year CDs yielding 4.65%.



Toyota Financial Savings Bank is another well-capitalized Nevada ILC, set up to provide savings accounts, mortgages and commercial loans to the company’s 35,000 U.S.-based Toyota and Lexus employees. Under its new chief executive, Mara McNeill, a former JPMorgan Chase auto finance executive—she graduated from the Air Force Academy in 1993 but also has a JD from Georgetown and a master’s in public policy from Harvard—its assets have grown from $1 billion in 2020 to nearly $6 billion, funded to a great extent by broker deposits, which currently stand at 58% of the total.



“It can be economically advantageous to have core deposits. You don’t have as much in fees from the FDIC,” McNeill says. “But at the same time, you’ve gotta pay for the salespeople to go out there and get those accounts. And so, you know, there’s a fee here and a cost there.”



Other successful but little-known industrial banks, all based in Utah, include Comenity, an $12 billion credit card lender; Nelnet, a $1 billion specialist in student loans; and Wex, a $6.5 billion bank offering gasoline charge cards to small and midsize fleets with discounts from refiners like Chevron and Exxon. Until a few years ago, $2 billion Medallion Bank specialized in financing taxicab medallions. But Uber and Lyft forced a hard pivot to lending for recreational vehicles and boats, and financing home contractors. Virtually all its funding comes from brokered deposits. “Our Deposits Don’t Run,” reads a headline on its website.



Industrial banks currently represent about 1% of all bank assets, but the ICBA apparently views them as a dire threat to community banking. In July 2005, when Walmart applied for an industrial bank charter, the ICBA helped orchestrate a tidal wave of thousands of alarming letters to the FDIC and Congress. Their message: Just as Walmart killed mom-and-pop retailing, an industrial bank charter would help it eliminate Main Street banks. In fact, efficiency-minded Walmart merely wanted to streamline credit card processing, saving money on bank fees, and would have been precluded from offering banking services directly to its customers.



The FDIC, under chairman Martin Gruenberg, ignored Walmart’s application. Then, a full year after the retailing giant submitted its forms, the FDIC announced a six-month moratorium on approving all ILC applications, ostensibly to “determine if any emerging safety and soundness or policy issues exist.” Walmart withdrew its application in March 2007, and that six-month moratorium wound up lasting 14 years, until Jelena McWilliams took over as FDIC chairperson and approved Nelnet and Square’s application.



“Martin Gruenberg does not like nontraditional banks. And so they just slow-walked the applications when they hit Washington,” says George Sutton, general counsel for the National Association of Industrial Bankers and Utah’s former commissioner of financial institutions. “Eventually it just goes into a black hole.” (The FDIC declined&nbsp;Forbes’&nbsp;interview requests.)



Banking crises are always about trust and stability, something traditional banks no longer have a monopoly on. Most people now trust Apple and Toyota more than their community bank. The next generation of banking customers care little about charters or regulatory turf wars and are savvy enough to know that hot money offering higher returns, whether from their local bank, fintech or broker, is smart money.

row of people to the bank teller cashier defocused background

Some Like It Hot: Can A Financial ‘Cancer’ From The 1980s Help Prevent Bank Runs?

<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



Stocks gained Wednesday thanks in part to another artificial intelligence-powered lift, as optimism emanating from the nascent technology keeps driving equities higher against a suboptimal macroeconomic backdrop.



<h2 class="wp-block-heading" id="h-key-facts">KEY FACTS</h2>



The Dow Jones Industrial Average, S&amp;P 500 and tech-heavy Nasdaq each rose 1.2% or more Wednesday, just the third time that happened since the beginning of April.



Yet again driving the gains were tech heavyweights, as Tesla (up 4.4%), Nvidia (3.4%), Amazon 1.8%), Meta (1.5%), Alphabet (1.3%), Microsoft (0.9%) and Apple (0.3%) spiked, tacking on a combined $123 billion in market capitalization Wednesday.



Those giants, which have rallied more than $1 trillion year-to-date collectively thanks in large part to the AI boom, offered more fuel for optimistic investors Wednesday, with Amazon&nbsp;<a href="https://www.bloomberg.com/news/articles/2023-05-17/amazon-unveils-new-alexa-gadgets-as-chatgpt-rivalry-heats-up" target="_blank" rel="noreferrer noopener">announcing</a>&nbsp;AI enhancements to its Alexa devices and Nvidia&nbsp;<a href="https://nvidianews.nvidia.com/news/servicenow-and-nvidia-announce-partnership-to-build-generative-ai-across-enterprise-it" target="_blank" rel="noreferrer noopener">unveiling</a>&nbsp;a new partnership with ServiceNow to expand generative AI in cloud computing.



Hedge fund billionaire Steve Cohen declared Tuesday he has a “pretty bullish” outlook on the market as a whole thanks to streamlined corporate efficiency from AI,&nbsp;<a href="https://www.bloomberg.com/news/articles/2023-05-17/steve-cohen-says-he-s-pretty-bullish-on-markets-thanks-to-ai?srnd=premium" target="_blank" rel="noreferrer noopener">according</a>&nbsp;to Bloomberg.



“I’m making a prognostication: We’re going up,” Cohen said about broad equity prices, explaining increased automation should widen corporate profits in coming quarters.



<h2 class="wp-block-heading" id="h-contra">CONTRA</h2>



The S&amp;P is up 9% year-to-date and excitement about what AI could mean for investors is at a&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2023/03/01/ai-is-the-new-electricity-bank-of-america-picks-20-stocks-to-cash-in-on-chatgpt-hype/?sh=55bfdf2a77ac">fever pitch</a>, but stocks will encounter a “rocky road” later this year, Wells Fargo strategist Scott Wren wrote in a Wednesday note to clients. Wren explained the strong likelihood of the U.S.&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2023/04/12/fed-officials-now-expect-us-will-enter-mild-recession-this-year-after-banking-crisis-rattles-markets/?sh=5433b921107c">slipping into</a>&nbsp;a recession and his expectation that companies will fail to deliver on profit expectations thanks to thinner margins as interest rates remain high. Earnings for S&amp;P companies declined by 6.8% year-over-year in the most recent quarter, according to recent Morgan Stanley research.



<h2 class="wp-block-heading" id="h-tangent">TANGENT</h2>



Tesla, which hosted its annual meeting with shareholders after Tuesday’s market close, posted its second-largest daily stock gain since March, tacking on $25 billion in market value after it said it will advertise its vehicle for the first time and its CEO Elon Musk vowed to remain in charge for the foreseeable future. Musk, who&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2023/05/16/elon-musks-attack-on-george-soros-distressing-and-dangerous-jewish-group-says/?sh=7ad31cc130ba">drew the ire</a>&nbsp;of several Jewish civil rights groups this week for touting conspiracies mirroring antisemitic tropes about billionaire George Soros, added the most to his net worth of anybody on earth Wednesday with a $5 billion bump.



<h2 class="wp-block-heading" id="h-forbes-valuations">FORBES VALUATIONS</h2>



Musk holds the second-largest fortune in the world at $181 billion, while Cohen is owner of the planet’s 93rd-largest wealth pile at $17.5 billion. Cohen chairs Point72 Asset Management and owns the New York Mets MLB team.



<h2 class="wp-block-heading" id="h-key-background">KEY BACKGROUND</h2>



Since the late 2022 launch of the Microsoft-subsidized ChatGPT generative AI product, AI fever has infected Wall Street; Bank of America strategists dubbed AI the “new electricity” in a March note, projecting it to create massive gains for stocks. A slew of technology companies have revealed their own AI services, but&nbsp;<a href="https://www.forbes.com/sites/jonathanponciano/2023/04/29/this-stock-market-indicator-is-the-weakest-its-ever-been-and-other-warning-signs-are-flaring/?sh=162f37947b4c">benefitting the most</a>&nbsp;are mega-cap tech stocks like Nvidia, Meta, Alphabet and Amazon, four of the 20 best-performing stocks on the S&amp;P year-to-date.



<h2 class="wp-block-heading" id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/dereksaul/2023/03/01/ai-is-the-new-electricity-bank-of-america-picks-20-stocks-to-cash-in-on-chatgpt-hype/?sh=55bfdf2a77ac">‘AI Is The New Electricity’: Bank Of America Picks 20 Stocks To Cash In On ChatGPT Hype</a> (Forbes)



<a href="https://www.forbes.com/sites/dereksaul/"></a>By Derek Saul, Forbes Staff

Markets Open After Falling More 800 Points On Tuesday

Dow Jumps 400 Points As This Billionaire Investor Says Stock Market Has Room To Grow

The world’s most valuable startup does more than any other investment to put VCs on the Forbes Midas List, including its No. 1. But tens of billions in paper profits remain blocked by regulatory standoff without resolution in sight.



It’s the biggest venture capital profit haul that no one wants to talk about.



ByteDance – the Chinese parent company of social media app TikTok – is the world’s most valuable startup. Even at a valuation of $220 billion, down from a peak of&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-08-02/china-specter-jolts-bytedance-s-backers-to-try-trimming-stakes?leadSource=uverify%20wall" target="_blank" rel="noreferrer noopener">$500 billion</a>&nbsp;in the secondary market in 2021, it’s not even close. (SpaceX, Elon Musk’s rocket company, slots in second at $140 billion.)



For its investors, some of whom backed the company when it was still valued in the millions, an eventual ByteDance public offering would mean billions, and even tens of billions of dollars, in profits, instantly vaulting their investments into the ranks of the top VC bets of all time. The company already does more to put investors on the Midas List of top venture capitalists than any other, even though the list prioritizes exits over unrealized returns in the rankings.



And in a rarity for venture capital, ByteDance’s investors are currently keeping very, very quiet with such a historic outcome still glimmering just out of reach. Forbes reached out to every 2023 Midas List member invested in ByteDance, including new list No. 1 Neil Shen of Sequoia China, a ByteDance board director, and No. 71 Anton Levy of General Atlantic, whose firm also holds a board seat. None agreed to speak on the record about the investment or the company’s prospects.



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<figure class="aligncenter size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-1024x436.png" alt="" class="wp-image-58176" width="330" height="140" srcset="https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-1024x436.png 1024w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-300x128.png 300w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-768x327.png 768w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-1536x653.png 1536w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa.png 1561w" sizes="(max-width: 330px) 100vw, 330px" /><figcaption class="wp-element-caption">(L-R) Adeyemi Ajao, Lauren Kolodny, and Steve Jang. CODY PICKENS FOR FORBES</figcaption></figure></div>


<a href="https://www.forbes.com/lists/midas/" target="_blank" rel="noreferrer noopener">The Midas List 2023</a>



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The reason, Forbes heard in several conversations with investors who asked to remain anonymous, as well as secondary market experts and analysts, is simple: TikTok. The social media app is hugely popular in the U.S., with 150 million users, including five million businesses, but outsized in controversy, too. In March, Forbes reported that the FBI and Department of Justice<a href="https://www.forbes.com/sites/emilybaker-white/2023/03/16/fbi-doj-investigating-bytedance-tiktok-surveillance-journalists/?sh=3c0efb77a6fc"> were investigating</a> ByteDance’s use of the TikTok app to surveil American journalists, including Forbes reporters. Other features, from a “heating” button that can<a href="https://www.forbes.com/sites/emilybaker-white/2023/01/20/tiktoks-secret-heating-button-can-make-anyone-go-viral/?sh=184f212e6bfd"> make posts go viral</a>, a library of “sensitive words” ByteDance<a href="https://www.forbes.com/sites/alexandralevine/2023/05/01/tiktok-bytedance-suppression-tool-trump-china-uyghurs/?sh=17df0706434c"> tracks on its apps</a>, to user data<a href="https://www.forbes.com/sites/alexandralevine/2023/03/21/tiktok-india-ban-bytedance-data-access/?sh=6ef55be62eca"> still accessible</a> in China years after its deletion, have helped make TikTok a political hot potato.



Several years after federal courts blocked the Trump administration from banning TikTok, some lawmakers and the Biden White House have resumed that call, with the government indicating that if ByteDance does not sell TikTok, the app will be banned. That uncertainty – and the looming role of the Chinese government, which has indicated that a sale is a non-starter – means that for TikTok’s venture capital investors, it’s best not to poke the bear. While some investors have unloaded smaller stakes and may continue to do so,&nbsp;Forbes&nbsp;has learned, Midas-making, billion-dollar-plus positions remain idling on the runway. And the secondary market – where ByteDance’s reduced $220 billion price tag has largely held up in recent weeks even as TikTok CEO Shou Zi Chew took a beating in a heated Congressional hearing – has ground mostly to a halt.



Board seat holders Sequoia and General Atlantic declined to comment. ByteDance did not immediately respond to a request for comment.



“With rising China-U.S. tensions, do ByteDance shares become an issue?” mused one ByteDance investor who asked not to be named. “That’s what we’re trying to figure out.”



Several years after federal courts blocked the Trump administration from banning TikTok, some lawmakers and the Biden White House have resumed that call, with the government indicating that if ByteDance does not sell TikTok, the app will be banned. That uncertainty – and the looming role of the Chinese government, which has indicated that a sale is a non-starter – means that for TikTok’s venture capital investors, it’s best not to poke the bear. While some investors have unloaded smaller stakes and may continue to do so,&nbsp;Forbes&nbsp;has learned, Midas-making, billion-dollar-plus positions remain idling on the runway. And the secondary market – where ByteDance’s reduced $220 billion price tag has largely held up in recent weeks even as TikTok CEO Shou Zi Chew took a beating in a heated Congressional hearing – has ground mostly to a halt.



Board seat holders Sequoia and General Atlantic declined to comment. ByteDance did not immediately respond to a request for comment.



“With rising China-U.S. tensions, do ByteDance shares become an issue?” mused one ByteDance investor who asked not to be named. “That’s what we’re trying to figure out.”



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<h2 class="wp-block-heading" id="h-from-early-bets-to-billions">From early bets to billions</h2>



If it weren’t for the politics, another ByteDance investor recently told Forbes, investors would be happy to talk about a “monster” business primed for the public markets. The company took in about $80 billion in revenue and $25 billion in gross operating profit, numbers separately reported by<a href="https://www.theinformation.com/articles/revenue-at-tiktok-owner-bytedance-rose-more-than-30-in-2022-topped-80-billion?rc=viwsit" target="_blank" rel="noreferrer noopener"> The Information</a> and<a href="https://www.economist.com/business/2023/04/13/bytedance-tiktoks-chinese-parent-reports-a-record-profit" target="_blank" rel="noreferrer noopener"> The Economist</a> in recent weeks and confirmed to Forbes by two sources. That would put it at roughly the same scale as Tencent, the public Chinese tech holding company that recently carried a market cap of about $470 billion. And it means that were ByteDance to go public, it would likely supplant Alibaba’s public offering, which raised $25 billion at a market cap of $231 billion in 2014, as the largest tech IPO ever.


<div class="wp-block-image">
<figure class="aligncenter size-full is-resized"><img loading="lazy" decoding="async" src="https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372.jpg" alt="" class="wp-image-58177" width="490" height="327" srcset="https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372-768x512.jpg 768w" sizes="(max-width: 490px) 100vw, 490px" /><figcaption class="wp-element-caption">Neil Shen. Photographer: Bryan van der Beek/Bloomberg via Getty Images</figcaption></figure></div>


When Shen first invested in ByteDance’s 2014 Series C funding round, his firm Sequoia China, the China-based fund manager for the global Sequoia brand, amassed a position of 10% of the company at a $465 million valuation. Shen could’ve gotten in for even cheaper a year before at a $60 million price tag,&nbsp;<a href="https://www.theinformation.com/articles/how-sequoias-neil-shen-built-a-china-powerhouse?rc=viwsit" target="_blank" rel="noreferrer noopener">but balked</a>. He’s since put more money into the company in most subsequent funding rounds, excluding one led by SoftBank in 2018.



Sequoia’s global growth funds also invested later into ByteDance; the firm purchased additional shares through secondary sales in 2020. Add it all up, and today Sequoia holds just over 10% of ByteDance still, per a source with knowledge – a position valued on paper at more than $22 billion. Shen and Sequoia declined to comment.



Another firm, Susquehanna International Group, reportedly holds an even bigger stake. SIG first backed ByteDance in 2012, and invested alongside Midas List No. 54 Yi Cao of Source Code Capital in two subsequent rounds before Shen. SIG holds about 15% of ByteDance,<a href="https://www.theinformation.com/articles/the-tiktok-investors-with-the-most-to-lose-from-a-u-s-ban?rc=viwsit" target="_blank" rel="noreferrer noopener"> per the report</a>. SIG isn’t considered for the Midas List because it’s not strictly a venture firm. It didn’t respond to a request for comment.



Among VCs, other Midas List investors with ByteDance stakes include No. 10 Hans Tung of GGV Capital, No. 20 Scott Shleifer of Tiger Global, No. 37 Marc Stad of Dragoneer Investment Group and No. 71 Anton Levy of General Atlantic.



Several of those firms got into ByteDance indirectly through Musical.ly, a lip-syncing app acquired by ByteDance in 2017. Qiming Venture Partners, whose former partner JP Gan made the 2022 Midas List, sold its position in 2019 at a $95 billion valuation, according to data from startup tracker PitchBook, pocketing $113 million. GGV, another Musical.ly backer, sold much of its stake along the way, according to a source. Qiming and GGV didn’t respond to requests for comment. (The U.S. government began investigating the sale in 2019; in 2020, President Donald Trump declared the sale invalid by executive order, but the order was overturned in court.)



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<iframe loading="lazy" title="The World’s Top Venture Capital Investors Of 2023 | Forbes" width="500" height="281" src="https://www.youtube.com/embed/bqfQfjUeMZ4?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>
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“People have sold quite a bit, and they’re debating selling more,” said one investor with knowledge of the thinking inside several ByteDance-holding firms. Firms with the largest stakes, or recent ones, including SIG, Sequoia, General Atlantic and Coatue, which invested in 2021, have mostly stood pat, according to three sources; Sequoia, in particular, hasn’t ever sold a single ByteDance share. “For the major shareholders, it would be hard for them to sell,” added one of the sources. All of the firms declined to comment.



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<h2 class="wp-block-heading">ByteDance shares feel the chill</h2>



ByteDance shareholders&nbsp;who do look to sell face a secondary market also spooked by Washington’s saber-rattling. Some deals are happening – SIG and SoftBank reportedly sold a $100 million-plus block of shares in March, per PitchBook – but not at the billion-dollar scale that would move the needle for ByteDance’s larger shareholders.



One point of debate is ByteDance’s fair price. Mutual funds AIG, Fidelity, BlackRock and T. Rowe Price still mark the company at share prices that imply a valuation range of $260 billion to $320 billion. Notice, a data provider that tracks bids and offers for secondary shares, estimates a real-time price of about $180 billion, similar to ByteDance’s December 2020 funding round. Notice shows a number of open buy and sell orders for ByteDance, with an order book totaling more than $3 billion in potential trade interest. But Notice has no record of any of those bids leading to trades, unusual for a big company with such interest, said Chuck Taylor, a Notice senior vice president. “It’s safe to say that many of the older indications of interest are not active,” he added.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Relative to other tech companies, it seems to be trading pretty cheaply, but there are these dark clouds.”
</blockquote>



Glen Anderson, a broker-dealer of ByteDance shares at Rainmaker Securities, said that investors continue to express interest in ByteDance at a $220 billion to $225 billion market cap price range, while sellers express a willingness to unload at a $235 billion to $240 billion range. “Pretty much all” of those bids and offers are in the ballpark of $50 million to $100 million positions, Anderson said. But the sellers are typically bundling a bunch of smaller stakes together, he added, not offering shares from one shareholder on ByteDance’s cap table.



“We’ve been surprised that, with all the noise in Washington, that marketplace hasn’t moved much in price,” Anderson said. Still, he pointed out that these numbers are half the value of 2021 transactions that implied a $400 billion-plus market cap, with the drop already factoring in regulatory uncertainty of a potential TikTok ban. ByteDance holders would hope to avoid the fate of investors in Juul, Anderson noted, the e-cigarette company that was ultimately whacked by regulators and saw its valuation written down 98% by acquirer Altria.



“If there were no regulatory risks for ByteDance, you would see a rally,” Anderson added. “Relative to other tech companies, it seems to be trading pretty cheaply, but there are these dark clouds.”



For Midas ByteDance backers, a brisk secondary market wouldn’t do more than alleviate pressure from potential limited partners looking for the funds they backed to return some cash. The big outcome remains an IPO, with or without the sale of TikTok. One ByteDance investor argued the ideal outcome would be for U.S. politicians to, having made noise on the issue and earned talking points, quietly move on from a potential ban. Then, ByteDance could consider a dual listing in the U.S. and Hong Kong, for maximum shareholder profits.



Failing that, the next best option for investors would be a sale of TikTok’s global business, opening the way for them to hold stakes in ByteDance and TikTok as separate entities — which could mean separate domestic IPOs. “Quite a few elements” of Congress would be sympathetic to a divestiture if it was done in the right way to address various national security concerns, said Jacob Helberg, an investor author who was appointed the commissioner of the United States-China Economic and Security Review Commission by House Speaker Kevin McCarthy in 2022. (He added he’s skeptical of it doing so.)



Such a sale would have to clear China’s own laws around the export of technologies, Helberg said. One ByteDance investor agreed such a sale appeared unlikely at present for that reason. “I think it would be best for them to sell, but the Chinese government isn’t allowing them to do that,” the source said. “TikTok has access to models and algorithms they wouldn’t want shared.”



If no deal or truce can be brokered, investors would face a worse scenario: TikTok banned in the U.S. and other countries, and ByteDance’s business entrenched around China. Even then, regulatory clarity could set a path for a public offering in China, another path to an exit. “A ban would likely catalyze going public in Hong Kong in our opinion,” Wedbush analyst Dan Ives said in an email.



That speaks to the real worst outcome for investors: no outcome at all. So long as TikTok remains in regulatory limbo, so do the exit scenarios for VCs. Their paper billions are enough to help with Midas status. But they can’t be banked yet.



“The investors I know are more nervous not about whether their investments will be liquid, but whether they’ll be able to repatriate those funds back to the U.S.,” said Helberg. “In the event of a geopolitical standoff over Taiwan, for example, you’d have to be completely delusional to assume that you’re going to be able to repatriate large amounts of funds in either direction. Capital flows would lock down.”



That’s why, despite ByteDance’s already outsized role in their portfolios, one investor laughed when asked why their peers wouldn’t talk about their investment on record. “That would be a great way to raise your hand for attention from the Chinese government, or a random U.S. lawmaker,” they said. “If not for the politics, we’d be shouting this deal from the rooftops.”



By Alex Konrad, Forbes Staff

In this photo illustration, a ByteDance logo is seen on a

For Top VCs, ByteDance’s Historic Windfall Remains A $220 Billion Mirage

<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



Deutsche Bank’s stock plunged Friday as the market hones in on the German firm as the next major bank at risk in the wake of long-time rival Credit Suisse’s collapse and similar events stateside.



<h2 class="wp-block-heading" id="h-key-facts">KEY FACTS</h2>



Frankfurt-listed shares of Deutsche Bank dropped 7.5%, now down more than 25% since March 8, when confidence in the international banking system began to crumble.



The collapse in share prices came as investors holding Deutsche Bank-issued debt securities stoked panic, with the rate of Deutsche Bank’s five-year credit default swaps surging to its highest level since 2019 (credit default swaps serve as a proxy for bond holders’ belief in the health of the issuing institutions).



&#8220;We are still on edge waiting for another domino to fall, and Deutsche is clearly the next one on everyone&#8217;s minds (fairly or unfairly),” IG Group analyst Chris Beauchamp&nbsp;<a href="https://www.reuters.com/markets/europe/financial-stocks-drag-european-markets-lower-2023-03-24/" target="_blank" rel="noreferrer noopener">told</a>&nbsp;Reuters.



The spillover effects of the confidence shakeup were felt in European and American markets.



Shares of UBS, the Swiss bank which rescued Credit Suisse on Sunday, fell 5%, while British and French giants HSBC and BNP Paribas slipped 3% and 5%, respectively; the five largest U.S. banks each slid more than 1%, while shares of First Republic, the American bank most often floated as the next institution at serious risk, fell 5%.



<h2 class="wp-block-heading" id="h-key-background">KEY BACKGROUND</h2>



Deutsche Bank, which&nbsp;<a href="https://www.justice.gov/opa/pr/deutsche-bank-agrees-pay-72-billion-misleading-investors-its-sale-residential-mortgage-backed" target="_blank" rel="noreferrer noopener">agreed</a>&nbsp;in 2017 to pay a $7.2 billion fine to the U.S. for its “irresponsible lending practices” in 2006 and 2007 that partially caused the Great Recession, managed to navigate through that controversy by dramatically cutting costs, cutting roughly 20% of its global workforce in a single day in 2018 and successfully turning a profit in its last 10 quarters. The unexpected failures of mid-sized American banks Silicon Valley Bank and Signature Bank earlier this month sent shockwaves throughout the global financial system, eventually leading to the last-second rescue of Credit Suisse. Holders of $17 billion in risky Credit Suisse bonds were not a part of the rescue deal and were left empty-handed, contributing to the rise in Deutsche Bank credit default swap rates as investors hope to avoid similarly finding themselves out of luck. Rising interest rates worldwide greatly contributed to the ongoing crisis, as banks took unrealized losses on longer-term bonds declining value and struggled to keep up proper liquidity.



<h2 class="wp-block-heading" id="h-crucial-quote">CRUCIAL QUOTE</h2>



“It is a clear case of the market selling first and asking questions later,” FlowBank analyst Paul de la Baume&nbsp;<a href="https://www.bloomberg.com/news/articles/2023-03-24/europe-s-banks-erase-weekly-gains-as-us-probe-adds-to-concerns" target="_blank" rel="noreferrer noopener">told</a>&nbsp;Bloomberg.



<h2 class="wp-block-heading" id="h-tangent">TANGENT</h2>



Smaller U.S. banks lost about $1.1 trillion in deposits over the last year, according to a recent J.P. Morgan analysis, with money moving into larger banks and cash investments. About half of the outflows came in the weeks following Silicon Valley Bank’s collapse, according to J.P. Morgan.



<h2 class="wp-block-heading" id="h-further-reading">FURTHER READING</h2>



<a href="https://www.wsj.com/articles/credit-suisse-bond-wipeout-threatens-250-billion-market-10be7d04" target="_blank" rel="noreferrer noopener">Credit Suisse Bond-Wipeout Threatens $250 Billion Market</a> (Wall Street Journal)



<a href="https://www.forbes.com/sites/dereksaul/"></a>By Derek Saul, Forbes Staff

Deutsche Bank Restructuring Plan Costs 18,000 Jobs

What’s Happening With Deutsche Bank As Shares Slide 7%

<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



The monumental failure of Silicon Valley Bank and Signature Bank earlier this month have raised concerns of system-wide contagion that could spread to other regional and local banks, and though experts say Americans’ money in those banks is safe, they also suggest people should diversify their assets and cash to help mitigate the risk.



<h2 class="wp-block-heading" id="h-key-facts">KEY FACTS</h2>



Americans with less than $250,000 in the bank are guaranteed their money is safe by the Federal Deposit Insurance Corporation (FDIC), which also&nbsp;<a href="https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley-faq.html" target="_blank" rel="noreferrer noopener">announced</a>&nbsp;it would make SVB customers whole, even if they had more than $250,000 in the bank.



For customers with more than $250,000 in a bank, Haydar Haba, managing partner of venture capital firm Andra Capital, advises diversifying money into two or three other banks or to put some of that money in federal bonds, which earn interest.



Matthew Goldberg, an analyst at Bankrate, called the collapse of SVB and Signature Bank a “wake-up call” for Americans to make sure their money is at an&nbsp;<a href="https://banks.data.fdic.gov/bankfind-suite/bankfind" target="_blank" rel="noreferrer noopener">FDIC-insured bank</a>, saying: “Even during times when there are no bank failures or few bank failures, you always have to make sure your money is safe and within FDIC limits and rules.”



Preferably, Haba said to choose a bank with a “Prime-1” rating from Moody’s Analytics, which considers a bank to be Prime-1 if it “reflects a superior ability to repay short-term obligations.”



<h2 class="wp-block-heading" id="h-crucial-quote">CRUCIAL QUOTE</h2>



“There is a feeling of a contagion going on, and the only thing the Fed can do in that case is what they did with SVB and Signature Bank, which is making customers whole,” Haba said. “The key is diversification. You can’t put all your eggs in one basket. It doesn’t make sense.”



<h2 class="wp-block-heading" id="h-key-background">KEY BACKGROUND</h2>



Santa Clara, California-based Silicon Valley Bank’s&nbsp;<a href="https://www.forbes.com/sites/conormurray/2023/03/13/what-to-know-about-silicon-valley-banks-collapse-the-biggest-bank-failure-since-2008/?sh=27737df4c279">abrupt collapse</a>&nbsp;earlier this month sparked fears that banks had not been prepared for the effects of rising inflation and the Federal Reserve’s interest rate hikes designed to curb inflation. The bank’s collapse has been linked to multiple rounds of interest rate hikes over the past year, which caused customers’ assets to lose value, prompting depositors at SVB, which catered to&nbsp;<a href="https://www.forbes.com/sites/anthonytellez/2023/03/13/coinbase-circle-paxos-here-are-the-major-firms-with-funds-tied-up-in-svb-and-signature-bank/?sh=707957d84574">large tech companies</a>&nbsp;like Circle, Roblox and Roku, to withdraw their money in a swift bank run. Even though the&nbsp;<a href="https://www.forbes.com/sites/marisadellatto/2023/03/12/fdic-will-protect-all-silicon-valley-bank-deposits-after-sudden-collapse-treasury-says/?sh=388abdf5216c">FDIC announced</a>&nbsp;last week it would make all SVB customers whole regardless of how much they had deposited in the bank, the bank’s failure alarmed Americans that their money might not be safe in other regional banks if those banks are jeopardized in a phenomenon called&nbsp;<a href="https://www.forbes.com/sites/brianbushard/2023/03/17/these-regional-banks-stocks-are-falling-as-contagion-fears-loom-following-svb-collapse/?sh=29bae1e23814">contagion</a>, in which the turmoil of one bank spreads to others. The same day the FDIC announced it would make SVB customers whole, New York’s state regulatory body took over&nbsp;<a href="https://www.forbes.com/sites/brianbushard/2023/03/13/what-happened-to-signature-bank-the-latest-bank-failure-marks-third-largest-in-history/?sh=716970c090ff">Signature Bank</a>, after a similar bank run and a sharp drop in its stock (the FDIC announced Sunday that banking giant Bancorp had&nbsp;<a href="https://www.forbes.com/sites/joewalsh/2023/03/19/signature-bank-deposits-bought-by-new-york-community-bancorp-after-sudden-collapse/?sh=405940e75d34">taken over</a>&nbsp;Signature Bank and assumed its deposits).



<h2 class="wp-block-heading" id="h-contra">CONTRA</h2>



Shares of multiple regional banks fell over the past week, including San Francisco-based First Republic Bank, which&nbsp;<a href="https://www.forbes.com/sites/brianbushard/2023/03/17/these-regional-banks-stocks-are-falling-as-contagion-fears-loom-following-svb-collapse/?sh=5aa8653814bd">sank by 36%</a>&nbsp;Thursday morning. Its shares later rebounded following the announcement of a $30 billion&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2023/03/16/first-republic-stock-crashes-but-bounces-back-as-big-banks-unveil-30-billion-rescue-plan/?sh=111a57ac21ce">rescue plan</a>&nbsp;through uninsured deposits from 11 of the country’s biggest banks. Some investors, however, criticized the move, including billionaire Bill Ackman, who&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2023/03/17/billionaire-ackman-extremely-concerned-30-billion-bank-rescue-plan-risks-financial-contagion-spiraling-out-of-control/?sh=3fe11176e899">warned</a>&nbsp;the rescue plan creates a “false sense of confidence.” Other economists, including&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2023/03/15/dow-drops-nearly-300-points-as-blackrock-chief-warns-svb-collapse-merely-first-domino-to-drop/?sh=2d3a40c459ba">Blackrock CEO Larry Fink</a>, caution the collapse of SVB could be just the “first domino to drop” before a “cascade throughout the U.S. regional banking sector.”



<h2 class="wp-block-heading" id="h-what-we-don-t-know">WHAT WE DON’T KNOW</h2>



Whether a&nbsp;<a href="https://www.forbes.com/sites/brianbushard/2023/03/14/warren-drafts-bill-to-reverse-trump-era-bank-deregulations-after-svb-collapse-report-says/?sh=20e749266926">bill proposed</a>&nbsp;in the wake of SVB’s collapse by Democratic lawmakers to enhance regulations on small and medium banks will pass the Republican-controlled House. The bill, introduced by Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) would reintroduce provisions of the Dodd-Frank Act that had been limited in 2018, including stress tests and enhanced risk-management practices. It faces&nbsp;<a href="https://www.forbes.com/sites/saradorn/2023/03/13/democrats-blame-svb-collapse-on-trump-era-regulatory-rollbacks-but-gop-opposes-stricter-rules/">opposition</a>&nbsp;from a group of Senate Democrats who said they had&nbsp;<a href="https://www.forbes.com/sites/saradorn/2023/03/15/senate-democrats-who-voted-for-2018-bank-deregulations-say-they-have-no-regrets/?sh=1a772253797e">no regrets</a>&nbsp;about supporting the 2018 deregulations, as well as congressional Republicans, including Sen. Tim Scott (R-S.C.), who argued the bill would not prevent banks from relying on the federal government to cover “excessive risks.”



<h2 class="wp-block-heading" id="h-tangent">TANGENT</h2>



Swiss banking giant Credit Suisse’s stock&nbsp;<a href="https://www.forbes.com/sites/roberthart/2023/03/20/credit-suisse-shares-plunge-60-and-european-bank-stocks-slide-after-ubs-rescue/?sh=681913de245d">plummeted by more than 60%</a>&nbsp;Monday morning, hitting a record low of 91 cents, one day after its rival&nbsp;<a href="https://www.forbes.com/sites/marisadellatto/2023/03/19/ubs-agrees-to-buy-embattled-bank-credit-suisse-central-bank-says/?sh=405d7baa3e66">UBS announced</a>&nbsp;plans to buy all of its shares in a $3.2 billion rescue plan. Shares of Credit Suisse, which had been&nbsp;<a href="https://www.forbes.com/sites/isabeltogoh/2021/11/04/credit-suisse-burned-by-archegos-and-greensill-scandals-shifts-focus-to-wealth-management-in-overhaul/?sh=42f371f42488">mired by controversies</a>&nbsp;over charges of money laundering, tax evasion and links to collapsed hedge fund Archegos and financial services firm Greensill Capital, fell after the bank&nbsp;<a href="https://www.forbes.com/sites/siladityaray/2023/03/14/credit-suisse-finds-material-weaknesses-in-its-financial-reporting-process/?sh=33633463419e">admitted</a>&nbsp;last week to “material weaknesses” in its financial reporting, becoming the latest bank to be affected by recent turmoil in the banking system.



<h2 class="wp-block-heading" id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/roberthart/2023/03/20/credit-suisse-shares-plunge-60-and-european-bank-stocks-slide-after-ubs-rescue/?sh=681913de245d">Credit Suisse Shares Plunge 60% And European Bank Stocks Slide After UBS Rescue</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/marisadellatto/2023/03/19/ubs-agrees-to-buy-embattled-bank-credit-suisse-central-bank-says/?sh=f01225a3e662">UBS Buying Rival Credit Suisse In $3.2 Billion Rescue Deal</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/brianbushard/2023/03/17/these-regional-banks-stocks-are-falling-as-contagion-fears-loom-following-svb-collapse/?sh=29bae1e23814">These Regional Banks’ Stocks Are Falling As Contagion Fears Loom Following SVB Collapse</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/petercohan/2023/03/20/why-186-other-banks-could-go-the-way-of-silicon-valley-bank/?sh=7e89cdf158ee">Why 186 Other Banks Could Go The Way Of Silicon Valley Bank</a> (Forbes)



By Brian Bushard, Forbes Staff<a href="https://www.forbes.com/sites/brianbushard/"></a>

South African Reserve Bank Governor Lesetja Kganyago Interview

Is Your Cash Safe In The Bank? Experts Offer Advice Amid Concerns Of Systemic Market Risk

<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



UBS Group AG has struck a deal to buy Credit Suisse—a rival Swiss bank rocked by financial turmoil—for over $3 billion, the <a href="https://www.ubs.com/global/en/media/display-page-ndp/en-20230319-tree.html?caasID=CAAS-ActivityStream" target="_blank" rel="noreferrer noopener">two</a> <a href="https://www.credit-suisse.com/about-us-news/en/articles/media-releases/credit-suisse-and-ubs-to-merge-202303.html" target="_blank" rel="noreferrer noopener">banks</a> announced Sunday, as bank executives and Swiss officials sprint to contain a crisis sparked in part by the collapse of two major U.S. banks last week.



<h2 class="wp-block-heading" id="h-key-facts">KEY FACTS</h2>



UBS ultimately agreed to pay $3.2 billion (or 3 billion Swiss Francs) in an all-share deal, with Credit Suisse investors receiving one UBS share for every 22.48 Credit Suisse shares held, up from a $1 billion initial offer that Credit Suisse&nbsp;<a href="https://www.bloomberg.com/news/articles/2023-03-19/credit-suisse-said-to-push-back-against-ubs-s-1-billion-offer?srnd=premium&amp;sref=h6OFVeND" target="_blank" rel="noreferrer noopener">reportedly</a>&nbsp;viewed as too low.



The deal represents a large discount compared to Credit Suisse’s market capitalization just two days ago: UBS says the acquisition will cost the equivalent of $0.82 (or 0.76 Swiss Francs) per share, less than half Credit Suisse’s $2.01 share price when markets closed Friday.



The combined company will have over $5 trillion in total invested assets, and UBS expects to make $8 billion in cost cuts over the next four years, UBS said in a&nbsp;<a href="https://www.ubs.com/global/en/media/display-page-ndp/en-20230319-tree.html?caasID=CAAS-ActivityStream" target="_blank" rel="noreferrer noopener">statement</a>&nbsp;late Sunday.



The Swiss government helped broker the deal, with an apparent goal of&nbsp;<a href="https://www.wsj.com/articles/ubs-offers-1-billion-to-take-over-credit-suisse-bfac51fa" target="_blank" rel="noreferrer noopener">completing the merger</a>&nbsp;before Asian markets open Monday morning.



As part of the agreement, the Swiss National Bank—the country’s central bank—offered Credit Suisse and UBS up to $108 billion in liquidity assistance loans, it said in a&nbsp;<a href="https://www.snb.ch/en/mmr/reference/pre_20230319/source/pre_20230319.en.pdf" target="_blank" rel="noreferrer noopener">statement</a>.



The Swiss government is also expected to speed the deal up by waiving the six-week waiting period normally required before a merger, according to the&nbsp;New York Times, and Swiss authorities are&nbsp;<a href="https://www.ubs.com/global/en/media/display-page-ndp/en-20230319-tree.html?caasID=CAAS-ActivityStream" target="_blank" rel="noreferrer noopener">not requiring UBS</a>&nbsp;to get shareholder approval.



<h2 class="wp-block-heading" id="h-crucial-quote">CRUCIAL QUOTE</h2>



“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss National Bank said.



<h2 class="wp-block-heading" id="h-big-number">BIG NUMBER</h2>



$54 billion. That’s how much Credit Suisse borrowed from the Swiss National Bank on Thursday. The central bank&nbsp;<a href="https://www.forbes.com/sites/brianbushard/2023/03/15/credit-suisse-turmoil-swiss-central-bank-will-support-troubled-bank-if-necessary/?sh=28fe408b7619">offered to provide liquidity</a>&nbsp;to Credit Suisse “if necessary” hours earlier, but the bank’s share price still slid almost 7% the following day.



<h2 class="wp-block-heading" id="h-key-background">KEY BACKGROUND</h2>



Shares of Credit Suisse have plummeted in recent weeks, and trading was halted Wednesday after the share price&nbsp;<a href="https://www.forbes.com/sites/roberthart/2023/03/15/credit-suisse-stock-plunges-to-record-low-as-bank-concerns-grow/#:~:text=Trading%20in%20Credit%20Suisse%20shares,weaknesses%E2%80%9D%20in%20its%20financial%20reporting.">fell up to 21%</a>. On Tuesday, the bank said it had found “material weaknesses” in its 2021 and 2022 financial reporting processes. In response, its biggest backer, the Saudi National Bank, said it wouldn’t buy any more shares in Credit Suisse. The recent collapses of Silicon Valley Bank and Signature Bank in the U.S., triggered partially by rising interest rates, caused uncertainty about wider vulnerabilities in the banking system worldwide—concerns that intensified after warning signs appeared at Credit Suisse. But the bank’s downfall wasn’t directly caused by SVB and Signature, and its problems predate the current crisis, as it ended the 2022 fiscal year with a loss of nearly $8 billion. The bank itself and some executives and advisors have also recently been linked to scandals, including alleged fraud and failing to prevent money laundering.



<h2 class="wp-block-heading" id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/ariannajohnson/2023/03/16/whats-happening-with-credit-suisse-explained-embattled-bank-rattles-stock-market-as-banking-crisis-deepens/?sh=68b78b3f35a2">What&#8217;s Happening With Credit Suisse, Explained: Embattled Bank Rattles Stock Market As Banking Crisis Deepens</a>&nbsp;(Forbes)



<a href="https://www.ft.com/content/ec4be743-052a-4381-a923-c2fbd7ea9cfd" target="_blank" rel="noreferrer noopener">UBS offers to buy Credit Suisse for up to $1bn | Financial Times</a>&nbsp;(Financial Times)



<a href="https://www.nytimes.com/2023/03/19/business/ubs-credit-suisse.html" target="_blank" rel="noreferrer noopener">UBS Nears Deal to Buy Credit Suisse &#8211; The New York Times</a>&nbsp;(New York Times)



<a href="https://www.bloomberg.com/news/articles/2023-03-19/credit-suisse-said-to-push-back-against-ubs-s-1-billion-offer?srnd=premium&amp;sref=h6OFVeND" target="_blank" rel="noreferrer noopener">Credit Suisse Said to Push Back Against UBS’s $1 Billion Offer</a>&nbsp;(Bloomberg)



<a href="https://www.wsj.com/articles/ubs-offers-1-billion-to-take-over-credit-suisse-bfac51fa?st=xgxhbro7darct8y&amp;reflink=desktopwebshare_permalink" target="_blank" rel="noreferrer noopener">UBS Offers $1 Billion to Buy Credit Suisse</a> (Wall Street Journal)



<a href="https://www.forbes.com/sites/marisadellatto/"></a>By Marisa Dellatto, Forbes Staff

Deutsche Bank AG Headquarters As Lender To Shrink Workforce By About 26,000

UBS Buying Rival Credit Suisse In $3.2 Billion Rescue Deal

With star backers like Leonardo DiCaprio and a planet-friendly mission, neobank Aspiration reached a valuation of $2.3 billion in 2021. Then growth stalled and its SPAC deal was delayed. Now it&#8217;s hawking its services in the dubious carbon credits business.



Ona Thursday in mid-October 2022, employees at Marina Del Rey, California-based <a href="https://www.forbes.com/companies/aspiration/">Aspiration</a> gathered virtually for a company-wide meeting. The nine-year-old business, which offered everything from a debit card for consumers to environmental sustainability services, had an important announcement to make. Of the 400 employees summoned, there was one glaring absence from the invitation list: its chief executive and cofounder, Andrei Cherny.



Cherny’s cofounder, Joe Sanberg, took the virtual floor, declaring that the startup’s chief sustainability officer, Olivia Albrecht, was now its chief executive officer. Sanberg, an unfamiliar face to many employees, failed to make any mention of Cherny, who had led the startup since its inception and had been well-liked. Not only wasn’t Cherny invited to the meeting, but his email and&nbsp;<a href="https://www.forbes.com/companies/slack-technologies">Slack</a>&nbsp;access had been terminated. Many raised their hands to ask the obvious questions, yet the leadership team ended the call without taking a single inquiry.



“Everyone was shocked,” says a former Aspiration employee. “People are still uncertain and concerned about what their future looks like.” In successive meetings over the next few months, the startup, whose website states it’s “committed to transparency,” never addressed Cherny’s abrupt departure.



“Aspiration remains grateful for the achievements of our founding leadership team,” an Aspiration spokesperson said in a statement. “They built a leading climate action platform that uses the tools of finance to tackle our planet’s biggest problems.”



Based on conversations with nearly a dozen former Aspiration employees,&nbsp;Forbes&nbsp;learned that a rift developed between CEO Cherny, 47, who owns 10% of the startup, and cofounder Sanberg, 43, who owns roughly 35%. By October, the market for tech stocks had already collapsed, and Cherny had failed in his efforts to take the once-promising fintech public. Although Cherny had been discussing his resignation with Sanberg and the rest of the board for months, the board decided to exclude him from the announcement. They promoted Albrecht, who previously led ESG (Environmental, Societal and Governance) strategy at asset manager PIMCO, and embarked on a restructuring, deemphasizing its consumer-banking focus and shifting toward a company selling carbon credits to corporations.



Aspiration’s upheaval is a stark departure from the situation just ten months prior, when Cherny and the company were riding the euphoria that helped fintech rake in a record $140 billion in investments in 2021, according to&nbsp;<a href="https://www.cbinsights.com/research/report/fintech-trends-2022/" target="_blank" rel="noreferrer noopener">CB Insights</a>. Aspiration had raised nearly $600 million from a dazzling list of investors that included Leonardo DiCaprio, Drake, Cindy Crawford,&nbsp;Iron&nbsp;Man&nbsp;Robert Downey Jr. and billionaire&nbsp;<a href="https://www.forbes.com/profile/steve-ballmer">Steve Ballmer</a>. After all, fintech was red-hot, and the unicorn’s tree-hugging mission promised to plant a tree with Aspiration debit card purchases.



In mid-2021, Cherny had struck a deal to go public via a special purpose acquisition company (SPAC) that would bring in more than $400 million in fresh capital and&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/1839610/000121390021043564/ea146087ex99-1_interprivate3.htm" target="_blank" rel="noreferrer noopener">value Aspiration at $2.3 billion</a>, creating a tidy gain for its backers.



But as the stock market tanked in 2022, SPACs fell swiftly out of favor. Eventually 180 of them were canceled, says Julian Klymochko, who runs asset management firm Accelerate, which invests in SPACs. Meanwhile, growth at Aspiration’s digital bank stalled. Monthly downloads of its app shrunk from 300,000 in August 2021 to 30,000 a year later, according to mobile analytics firm Apptopia&nbsp;(see chart, below).



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading" id="h-decimated-downloads">DECIMATED DOWNLOADS</h2>



<h4 class="wp-block-heading" id="h-aspiration-s-app-downloads-plummeted-as-the-fintech-market-cratered-and-the-company-shifted-focus-from-consumer-banking-to-selling-carbon-credits-to-businesses">Aspiration’s app downloads plummeted as the fintech market cratered and the company shifted focus from consumer banking to selling carbon credits to businesses.</h4>



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Under Cherny’s leadership, Aspiration had begun to shift its business model toward a niche of the environmental sustainability industry called carbon credits, or carbon offsets. The basic idea: Any company can mitigate the damage its business does to the environment by funding initiatives that will remove carbon from the atmosphere, such as planting trees. Since early 2020, one of the trademark features of Aspiration’s digital bank has been that you can round up purchases to the nearest dollar and donate to tree-planting organizations. Aspiration apparently decided that planting trees could be the basis for its new business model of selling carbon credits to large companies.



“We are very much focused on delivering profitable, scalable businesses to our shareholders,” says CEO Albrecht, 40. “As we&#8217;ve looked at our ability to have an impact and create value for shareholders, the carbon business and carbon assets are very attractive for us.”&nbsp;<a href="https://www.aspiration.com/" target="_blank" rel="noreferrer noopener">Aspiration’s website</a>&nbsp;has been revamped—it now leads with “Empowering business to change climate change” and advertises a mission to plant one billion trees by 2030.



In 2021, Aspiration’s carbon credits sales brought in&nbsp;<a href="https://assets.ctfassets.net/ejg6grzpbbxj/6CPjR0sfLq8XVq02eo0JUK/cd95b54cf9196c8c4cd6280e4d752718/Aspiration_4Q21_Earnings_Release__02-17-22_.pdf" target="_blank" rel="noreferrer noopener">$56 million</a>&nbsp;in revenue compared with $29 million from digital banking (another $14 million came from “consumer sustainability services” like the roundup feature for planting trees). But just as the California fintech is doubling down on this new mission, the future of carbon credits is in question, with experts saying carbon credits’ environmental impact has been grossly overestimated. There’s a “crisis in quality” in carbon offsets, says Barbara Haya, director of the Berkeley Carbon Trading Project, who has been studying offsets for over two decades. “The market is in a huge amount of flux, and anyone who enters has to weather this sense that we don’t know what direction things are going.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Andrei Cherny’s path&nbsp;to becoming a tech entrepreneur defies convention. He majored in government at Harvard and got a law degree from the University of California at Berkeley in 2003. He then served as White House aide to President Bill Clinton and wrote speeches for Al Gore and John Kerry. Cherny’s next stop was the U.S. Navy as a reserve intelligence officer for eight years until 2011. He also was part of the team that helped Elizabeth Warren launch the Consumer Financial Protection Bureau (CFPB) in 2010.



In 2013, he cofounded Aspiration with Joe Sanberg, who has said he&nbsp;<a href="https://jewishjournal.com/cover_story/182589/" target="_blank" rel="noreferrer noopener">worked on Wall Street</a>&nbsp;for seven years at Tiger Global and Blackstone but who&nbsp;<a href="https://www.linkedin.com/pulse/fireside-chat-aspiration-co-founder-chair-board-joseph-lustrino/" target="_blank" rel="noreferrer noopener">left finance</a>&nbsp;“to pursue what really speaks to my heart, which is to change the world.”



Aspiration took a novel approach to creating a digital-first, branchless bank by appealing to environmentally conscious consumers. It offered features like a “sustainability score” that shows customers how climate-friendly their purchases are. With help from subadvisor UBS, it created its own mutual fund for climate-conscious consumers called Aspiration Redwood, though the fund, which has accumulated only $132 million in assets, has high fees and lackluster performance, according to&nbsp;<a href="https://www.morningstar.com/funds/xnas/redwx/performance" target="_blank" rel="noreferrer noopener">Morningstar</a>. Like other neobanks, Aspiration is not a licensed bank. But it registered as a broker-dealer so it could earn interest income on customers’ deposits, as opposed to relying only on interchange, the fees merchants pay when consumers swipe their debit and credit cards. Many neobanks have found they&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2023/02/08/merger-or-perish-25-struggling-fintech-startups">can’t survive on interchange</a>&nbsp;alone.



After the pandemic hit and fintech startups saw a surge in adoption from Americans stuck at home, Aspiration grew from roughly 1.5 million customers in early 2020 to five million “purpose-driven members” in the summer of 2021. But those user numbers weren’t quite what they appeared to be. Like other tech startups eager to tout growth above all, Aspiration was referring to the total number of registered emails it had, regardless of whether the customers ever used the product. As of June 2021, it had just 592,148 funded accounts.



Meanwhile, the startup spent extravagantly on marketing to hit aggressive growth targets. In its&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/1839610/000121390021043566/ea146087ex99-2_interprivate3.htm" target="_blank" rel="noreferrer noopener">pitch to go public</a>, Aspiration planned to spend $149 million on marketing in 2021, even though it expected to take in just $98 million in revenue.



Questions arose around its environmental impact claims. Though Cherny had said Aspiration’s partners had planted over 35 million trees, a&nbsp;<a href="https://www.propublica.org/article/the-celebrity-backed-green-fintech-company-that-isnt-as-green-as-it-seems" target="_blank" rel="noreferrer noopener">Pro-Publica article</a>&nbsp;revealed that only about 16 million had been put in the ground. The other 19 million had been funded but not yet planted. “The Aspiration community has supported the planting of more than 35 million trees, an amazing accomplishment we’re really proud of,” Cherny said in response to the criticism. (Today, Aspiration&nbsp;<a href="https://www.prnewswire.com/news-releases/aspiration-plants-101-million-trees-with-eden-reforestation-projects-301735489.html" target="_blank" rel="noreferrer noopener">says</a>&nbsp;it has planted more than 100 million trees.)



In October 2021, just as fintech stock valuations were peaking, the company launched Aspiration Zero, a credit card&nbsp;<a href="https://www.businesswire.com/news/home/20211014005303/en/Groundbreaking-Aspiration-Zero-Launches-Today-First-of-its-Kind-Credit-Card-Built-to-Fight-the-Climate-Crisis" target="_blank" rel="noreferrer noopener">claiming</a>&nbsp;it could “offset the average person’s entire carbon footprint just by using it once a day.” Two months later, it&nbsp;<a href="https://investors.blueapron.com/press-releases/2021/12-15-2021-220513199" target="_blank" rel="noreferrer noopener">announced</a>&nbsp;that meal delivery service Blue Apron would launch a Blue Apron Aspiration Zero card.



In early 2022, Aspiration started seeing declines in the number of transactions customers were making and the amount of money they were keeping in their accounts, says a former employee. New-user growth slowed dramatically as interest rates rose and the company pulled back on marketing. To make matters worse, the Aspiration Zero card was plagued by technical issues and problems with its partner bank. By December 2022, the card had fewer than 10,000 users, says a former employee. The deal with Blue Apron was called off completely, and today Aspiration Zero is no longer accepting new applications. Asked whether it will come back online, Albrecht says, “We are taking a deep dive and taking a look at the underlying profitability and the underlying quality of all products.”



In December 2022, Aspiration laid off roughly 100 employees, and shortly afterward, Albrecht announced that the company would be focusing on selling carbon credits to corporations. All consumer marketing would be paused, and new features that had been planned for Aspiration’s digital banking business were put on hold, according to a former employee.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Given the intense competition&nbsp;and rising costs that digital bank startups face–plus the dormant market for funding these ventures–it’s no wonder Aspiration has chosen carbon credits as its new raison d&#8217;être. According to McKinsey and environmental research organization Ecosystem Marketplace, the voluntary carbon credits market could grow to&nbsp;<a href="https://www.mckinsey.com/~/media/mckinsey/business%20functions/sustainability/our%20insights/a%20blueprint%20for%20scaling%20voluntary%20carbon%20markets%20to%20meet%20the%20climate%20challenge/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge.pdf" target="_blank" rel="noreferrer noopener">$50 billion in 2030</a>, up from nearly&nbsp;<a href="https://www.ecosystemmarketplace.com/articles/the-art-of-integrity-state-of-the-voluntary-carbon-markets-q3-2022/" target="_blank" rel="noreferrer noopener">$2 billion in 2021</a>. Over 30% of the world’s largest publicly traded companies&nbsp;<a href="https://ca1-nzt.edcdn.com/Net-Zero-Tracker/Net-Zero-Stocktake-Report-2022.pdf?v=1655074300" target="_blank" rel="noreferrer noopener">have net zero targets</a>–goals to balance their emissions with an equal set of carbon-absorbing initiatives–up from only 20% in 2020.



Most of Aspiration’s credits come from tree-planting reforestation projects. It has contracted with nonprofit partners like Eden Reforestation to plant trees in countries like Kenya, Madagascar, Mozambique and Indonesia. New trees can take from five to seven years to grow and start absorbing carbon, and they can’t be sold as credits until then. To bridge that gap, Aspiration also buys and sells access to mature projects that are already sucking up greenhouse gasses, including reforestation offsets, ocean-kelp offsets and soil-transformation offsets. In terms of competitive moats around Aspiration’s tree-planting business model, it&#8217;s difficult to determine if one exists.



Albrecht says that Aspiration only deals in “high-quality, high-impact carbon credits,” though their quality is hard to assess, given limited transparency into their projects. She also says Aspiration transacts only in credits that are registered under one of the major independent carbon standards agencies, such as Verra and Gold Standard. Aspiration also created its own “Aspiration Standard” that involves independent reviews, and it says only 20% of registry-issued credits meet that hurdle.



Despite rosy long-term forecasts, success in the carbon credits business will be challenging for Aspiration. Carbon offsets are a nascent market—it’s a Wild West with many projects of dubious legitimacy.



Some credits, for example, are based on “avoidance,” where someone pays a government or landowner to promise not to cut a forest down. New Hampshire-based Lyme Timber once sold carbon credits from land that was already protected by the state of Tennessee,&nbsp;<a href="https://www.bloomberg.com/news/articles/2022-03-17/timber-ceo-wants-to-reform-flawed-carbon-offset-market?sref=BQ0oui0v" target="_blank" rel="noreferrer noopener">Bloomberg reported</a>&nbsp;last year. Some of these credits were then purchased by Chevron, letting the oil giant write off emissions based on trees that would have never been cut down in the first place. (<a href="https://www.lymetimber.com/bloomberg-article-on-lyme/" target="_blank" rel="noreferrer noopener">Lyme Timber later wrote</a>&nbsp;that the rules for carbon credits have changed such that this would no longer be possible.)



“We’re all coming to the same conclusion that the majority of offsets on the market are not genuine,” says Elias Ayrey, head scientist at carbon-credit ratings agency Renoster. Amy Francetic, cofounder of climate solutions investment firm Buoyant Ventures, won’t invest in carbon-credit startups until there’s more certainty in the market. “The rush of capital–especially from big polluters–into the space as a means of satisfying shareholder, customer and employee concerns about their emissions and polluting activities, and looking at that as kind of a Band-Aid on their situation is really troubling,” she says.



According to Quantum Commodity Intelligence, the uncertainty surrounding the quality of offsets and negative media attention have recently caused monthly trading volume for voluntary carbon credits to plummet, down 78% in the last two months on CBL Markets, a global trading platform for environmental commodities.



While Aspiration’s enterprise carbon-offsets business doesn’t involve secondary market trading, it’s unclear if its business has been affected by the recent downturn. According to its most recent financial disclosures, Aspiration had accumulated more than $300 million in&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/1839610/000119312522042546/d204847ds4.htm" target="_blank" rel="noreferrer noopener">net losses</a>&nbsp;for 2019, 2020 and the nine months ending September 30, 2021. A former employee says Aspiration had more than $200 million in revenues in 2022, with 75% or more coming from its sustainability business, though it remains unprofitable.



It’s difficult to assess the staying power and profitability of Aspiration’s carbon-credits revenue. In the fall of 2021, for example, Aspiration landed a multiyear deal with the L.A. Clippers for them to buy carbon credits from the startup. There were major strings attached: Aspiration simultaneously agreed to buy a big sponsorship from the Clippers to display its brand in the arena. People familiar with the deal say Aspiration either broke even or lost money on it.



Among startups, perhaps especially those in which planting trees is a core competency, hope springs eternal. Aspiration has not yet given up on the SPAC merger it first promised investors in August 2021. The IPO deal deadline has been delayed twice, first to December 31, 2022, and more recently to March 31, 2023. Stay tuned.



 By Jeff Kauflin and Emily Mason, Forbes Staff<a href="https://www.forbes.com/sites/jeffkauflin/"></a>

A smartphone displays the S&P 500 market value on the stock

A Floundering Fintech’s Risky Reboot

No one is set to lose more from FTX’s implosion than Sam Bankman-Fried, the crypto wunderkind who founded the exchange and then drove it into the ground this week. His net worth, once as high as $26.5 billion, has plummeted to less than a billion dollars–one of the fastest falls from the billionaires ranks ever. FTX users and employees may be in for big losses too, with Bankman-Fried now&nbsp;<a href="https://www.wsj.com/livecoverage/stock-market-news-today-11-09-2022/card/ftx-needs-8-billion-bankman-fried-tells-investors-2RSa5oqZyZZ5YrPLuZuL" target="_blank" rel="noreferrer noopener">trying to cobble together emergency funding</a>&nbsp;to cover a shortfall of up to $8 billion as customers demand their money back. “I can&#8217;t make any promises,” he&nbsp;<a href="https://twitter.com/SBF_FTX/status/1590709181077934081" target="_blank" rel="noreferrer noopener">tweeted Thursday</a>. “But I&#8217;m going to try.”



Then there are FTX’s investors.



As the crypto exchange ballooned in size, it became a huge draw for venture capitalists eager to get in on the Bitcoin boom. In June 2021, FTX raised $1 billion at an $18 billion valuation from venture investors such as Paradigm, SoftBank and Sequoia Capital. Three months later, FTX brought in a $421 million haul, pushing its valuation to $25 billion, from investors like Singapore-government owned investment firm Temasek, Tiger Global Management and the Ontario Teachers’ Pension Plan. By January of this year, crypto prices were on the decline, but FTX charged ahead. Investors, many of whom had also pumped money into the earlier rounds, put another $400 million into FTX–at a $32 billion valuation.



<h2 class="wp-block-heading" id="h-temasek">TEMASEK&nbsp;</h2>



<h3 class="wp-block-heading" id="h-stake-in-ftx-1">Stake in FTX: 1%</h3>



<h3 class="wp-block-heading" id="h-est-amount-invested-205-million">Est. amount invested: $205 million</h3>



<h3 class="wp-block-heading" id="h-value-at-january-2022-peak-320-million">Value at January 2022 peak: $320 million</h3>



An investment company owned by the government of Singapore, Temasek is the second-largest outside investor on the capitalization table, with 7 million shares. The $297 billion (assets) business, which owns big stakes in Singapore’s DBS Group and Singapore Airlines, invested in all three of FTX’s major funding rounds. With its $320 million stake on the brink of being worthless, a Temasek spokesperson&nbsp;<a href="https://www.reuters.com/markets/currencies/cryptos-attempt-steady-binance-ftx-deal-chills-market-2022-11-09/" target="_blank" rel="noreferrer noopener">told&nbsp;Reuters</a>&nbsp;on Wednesday that they were “aware of the developments” and were “engaging FTX in our capacity as shareholder.&#8221;



<h2 class="wp-block-heading" id="h-paradigm">PARADIGM</h2>



<h3 class="wp-block-heading" id="h-stake-in-ftx-1-1">Stake in FTX: 1%</h3>



<h3 class="wp-block-heading" id="h-est-amount-invested-215-million">Est. amount invested: $215 million</h3>



<h3 class="wp-block-heading" id="h-value-at-january-2022-peak-315-million">Value at January 2022 peak: $315 million</h3>



Paradigm, an investment firm “focused on supporting the crypto/Web3 companies and protocols of tomorrow,” invested in the exchange’s series B and C rounds and owned nearly 7 million shares of FTX as of August. “There&#8217;s a bright future ahead for Sam and FTX,” Paradigm cofounder Matt Huang said in July 2021, “and Paradigm is excited to be a part of it.&#8221;



According to&nbsp;The Information, Alameda Research also invested at least $20 million in Paradigm.



<h2 class="wp-block-heading" id="h-ontario-teachers-pension-plan">ONTARIO TEACHERS’ PENSION PLAN</h2>



<h3 class="wp-block-heading" id="h-stake-in-ftx-0-4">Stake in FTX: 0.4%</h3>



<h3 class="wp-block-heading" id="h-est-amount-invested-80-million">Est. amount invested: $80 million</h3>



<h3 class="wp-block-heading" id="h-value-at-january-2022-peak-125-million">Value at January 2022 peak: $125 million</h3>



The Ontario Teachers&#8217; Pension Plan, which manages the retirement funds of 333,000 teachers in the Canadian province,&nbsp;<a href="https://www.otpp.com/en-ca/about-us/news-and-insights/2022/ontario-teachers--statement-on-ftx/" target="_blank" rel="noreferrer noopener">invested a total of $95 million</a>&nbsp;between FTX and FTX U.S. in late 2021 and early 2022. The FTX portion of that investment alone was worth an estimated $130 million following FTX’s series C round–before the crypto winter and current crisis. “While there is uncertainty about the future of FTX,” Ontario Teachers’&nbsp;<a href="https://www.otpp.com/en-ca/about-us/news-and-insights/2022/ontario-teachers--statement-on-ftx/" target="_blank" rel="noreferrer noopener">wrote in a statement</a>, “any financial loss on this investment will have limited impact on the plan, given this investment represents less than 0.05% of our total net assets.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<abbr>W</abbr>hile these are the main shareholders identified on the capitalization table obtained by&nbsp;Forbes, there are other big investors not mentioned who have likely lost big. The rest of FTX’s series B investors, who bought into the $1 billion round in June 2021, own another 3.5% of the exchange. These investors include entities tied to billionaires Paul Tudor Jones, Daniel Loeb and Israel Englander, plus firms like Tiger Global Management and SoftBank–both of which also got in on FTX’s series C round in January, likely making them substantial shareholders as well. Investors from that round, not including Temasek and Paradigm, own nearly 1% of FTX, according to the capitalization table, putting their paper losses north of $270 million. Big numbers, but drops in the bucket for these funds, which often have so much capital they can afford to put large sums into scores of risky unicorns, so long as at least one or two pans out.



At least two famous faces who inked endorsement deals with FTX are poised to lose, too. NFL legend Tom Brady and fashion model Gisele Bundchen owned 0.15% and 0.09% of FTX as of June 2021, respectively, according to an earlier capitalization table also shared with&nbsp;Forbes&nbsp;by Bankman-Fried. Accounting for assumed dilution in the subsequent funding rounds,&nbsp;Forbes&nbsp;estimates their ownership in FTX at 0.14% and 0.8%, respectively. It’s unclear how much the ex-couple invested for their shares, but Brady’s estimated stake would have been worth $45 million, and Gisele’s worth $25 million, before crypto prices fell and Bankman-Fried&nbsp;<a href="https://twitter.com/TomBrady/status/1543965253523881986?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1543965253523881986%7Ctwgr%5Ed8965981b6411b69a1f6de7489393a7883dd52cc%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fnypost.com%2F2022%2F11%2F09%2Ftom-brady-gisele-bundchen-now-caught-up-in-ftx-collapse%2F" target="_blank" rel="noreferrer noopener">took a flamethrower to their investment</a>.



Among the most impacted: FTX employees.&nbsp;According to the capitalization table, the company’s option pool held 20,858,124 shares, or about 3% of FTX, as of August. In January, FTX employees owned as much as $950 million worth of stock. Now it’s likely worthless. Will they get that money back? Bankman-Fried has made his priorities clear: Users first, according to&nbsp;<a href="https://twitter.com/SBF_FTX/status/1590709166515310593" target="_blank" rel="noreferrer noopener">a series of tweets he posted Thursday</a>, then he’ll focus on investors–“old and new”–then Bankman-Fried says he’ll take care of workers. Well, those who “have fought for what&#8217;s right for their career,”&nbsp;<a href="https://twitter.com/SBF_FTX/status/1590709195892195329" target="_blank" rel="noreferrer noopener">he clarified</a>, “and who weren&#8217;t responsible for any of the f*ck ups.”



By Chase Peterson-Withorn, Forbes Staff

Key Speakers At The Bloomberg Crypto Summit

Exclusive: These Investors Stand To Lose The Most From FTX’s Implosion

<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



Binance will back out of its agreement to buy rival cryptocurrency exchange FTX, Binance&nbsp;<a href="https://twitter.com/binance/status/1590449161069268992?s=20&amp;t=Bv53HKx3T-UkhgtKBZ3-Ng" target="_blank" rel="noreferrer noopener">said</a>&nbsp;Wednesday afternoon, the latest in the sudden unraveling of billionaire Sam Bankman-Fried’s crypto titan FTX once valued at $32 billion, taking down the value of digital assets with it.



<h2 class="wp-block-heading">KEY FACTS</h2>



FTX’s liquidity “issues are beyond our control or ability to help,” Binance&nbsp;<a href="https://twitter.com/binance/status/1590449164932243456?s=20&amp;t=Bv53HKx3T-UkhgtKBZ3-Ng" target="_blank" rel="noreferrer noopener">tweeted</a>&nbsp;hours after sources told the&nbsp;<a href="https://www.wsj.com/articles/binance-is-said-to-be-likely-to-walk-away-from-deal-to-buy-ftx-11668020963?mod=hp_lead_pos1" target="_blank" rel="noreferrer noopener">Wall Street Journal</a>&nbsp;and&nbsp;<a href="https://www.coindesk.com/business/2022/11/09/binance-is-strongly-leaning-toward-scrapping-ftx-rescue-takeover-after-first-glance-at-books-source/" target="_blank" rel="noreferrer noopener">Coindesk</a>&nbsp;that the world’s largest crypto exchange is unlikely to move forward with its bailout of FTX after scrutinizing the latter’s books.



The scrap comes only a day after Binance&nbsp;<a href="https://www.forbes.com/sites/ninabambysheva/2022/11/08/binance-intends-to-acquire-ftx/?sh=af2e18c1a934">announced</a>&nbsp;a nonbinding agreement to purchase FTX’s non-U.S. operations as FTX suffered a liquidity crisis akin to a bank run as users attempted to withdraw billions from the platform, partially spurred by Binance’s billionaire CEO Changpeng Zhao.



Zhao&nbsp;<a href="https://twitter.com/cz_binance/status/1589283421704290306?ref_src=twsrc%5Etfw" target="_blank" rel="noreferrer noopener">tweeted</a>&nbsp;early Sunday that his firm would sell all of its holdings in the FTX crypto token due to “recent revelations,” an apparent reference to a Coindesk&nbsp;<a href="https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/" target="_blank" rel="noreferrer noopener">report&nbsp;</a>last Wednesday that Alameda Research, Bankman-Fried’s crypto trading firm closely linked to FTX, largely held its assets in FTX’s coin.



Though Bankman-Fried called concerns about his companies’ finances “unfounded rumors” Monday, users flooded FTX with withdrawal requests and piled out of the FTX coin, with the token falling some 86% since Sunday, and falling from its $14 billion market capitalization in March to a mere $825 million.



Crypto assets broadly crashed as the industry mourned the loss of their&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2022/11/08/crypto-crash-intensifies-amid-downfall-of-industrys-white-knight-bankman-fried/?sh=8d4885825f9d">“white knight”</a>&nbsp;Bankman-Fried, with bitcoin, ethereum and shares of exchange Coinbase each falling 20% or more since Sunday.



FTX did not immediately respond to&nbsp;Forbes’ request for comment.



<h2 class="wp-block-heading">BIG NUMBER</h2>



$176 billion. That’s how much market cap the world’s 15 largest cryptocurrencies have shed over the last 72 hours according to&nbsp;Forbes’&nbsp;<a href="https://www.forbes.com/digital-assets/traded-assets/">tracker</a>. The FTX-fueled crash sent the industry from $903 billion to $727 billion.



<h2 class="wp-block-heading">WHAT WE DON’T KNOW</h2>



How FTX would fix its withdrawal pileup without Binance’s help. Bankman-Fried&nbsp;<a href="https://twitter.com/SBF_FTX/status/1590012126701441025" target="_blank" rel="noreferrer noopener">tweeted</a>&nbsp;Tuesday Binance will help to “clear out liquidity crunches” and cover withdrawals “1:1,” and his firm will likely need outside help. Federal financial regulators and the Department of Justice are investigating FTX’s behavior during the liquidity crisis,&nbsp;<a href="https://www.bloomberg.com/news/articles/2022-11-09/us-probes-ftx-empire-over-handling-of-client-funds-and-lending" target="_blank" rel="noreferrer noopener">according</a>&nbsp;<a href="https://www.bloomberg.com/news/articles/2022-11-10/us-justice-department-looking-into-ftx-turmoil-amid-sec-probe?srnd=premium" target="_blank" rel="noreferrer noopener">to Bloomberg</a>. FTX isn’t legally required to cover withdrawals in the same way a FDIC-insured bank would be, setting up a potentially dire scenario for customers. GlobalBlock analyst Marcus Sotiriou&nbsp;<a href="https://www.forbes.com/sites/jonathanponciano/2022/08/18/crypto-winter-watch-all-the-big-layoffs-record-withdrawals-and-bankruptcies-sparked-by-the-2-trillion-crash/?sh=49fffc513309">told</a>&nbsp;Forbes&nbsp;in July bankrupt crypto firms are “in a really sticky situation because they’ve been irresponsible with clients’ funds, somehow lost out and are now unable to pay back their clients—and there’s no guarantee they’ll pay the money back.” Bankman-Fried told investors Wednesday that the firm faced a shortfall of $8 billion and would need $4 billion to stay solvent, Bloomberg&nbsp;<a href="https://www.bloomberg.com/news/articles/2022-11-09/ftx-investors-told-that-without-more-capital-bankruptcy-likely?srnd=premium-europe" target="_blank" rel="noreferrer noopener">reported</a>. Without the funding, he said the company would need to file for bankruptcy, the outlet added, citing an unnamed person with direct knowledge of the matter.&nbsp;



<h2 class="wp-block-heading">CRUCIAL QUOTE</h2>



“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of http://FTX.com,” Binance&nbsp;<a href="https://twitter.com/binance/status/1590449161069268992?s=20&amp;t=Bv53HKx3T-UkhgtKBZ3-Ng" target="_blank" rel="noreferrer noopener">tweeted</a>.



<h2 class="wp-block-heading">KEY BACKGROUND</h2>



Bankman-Fried&nbsp;<a href="https://www.marketwatch.com/story/sam-bankman-fried-says-hes-a-scaled-down-j-p-morgan-of-the-crypto-industry-11665697797" target="_blank" rel="noreferrer noopener">once referred</a>&nbsp;to himself as a modern-day J.P. Morgan for his knack for buying up struggling rivals, making FTX’s bailout all the more dramatic and ironic. It’s been a year to forget for the nascent industry, with several notable crypto exchanges and lenders going under and the top assets shedding roughly 70% in value year-to-date.



<h2 class="wp-block-heading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/dereksaul/2022/11/09/crypto-crash-deepens-bitcoin-hits-2-year-low-after-ftx-implosion/?sh=10428b2d3a73">Crypto Crash Deepens: Bitcoin Hits 2-Year Low After FTX Implosion</a>(Forbes)



<a href="https://www.forbes.com/sites/stevenehrlich/2022/11/08/is-this-the-end-for-sam-bankman-fried/?sh=47d92de76908">Is This The End For Sam Bankman-Fried?</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/dereksaul/2022/11/08/crypto-crash-intensifies-amid-downfall-of-industrys-white-knight-bankman-fried/?sh=30456dfb25f9">Crypto Crash Intensifies Amid Downfall Of Industry&#8217;s &#8216;White Knight&#8217; Bankman-Fried</a>&nbsp;(Forbes)



By Derek Saul, Forbes Staff

2022 Web Summit In Lisbon

Binance Bails On FTX Acquisition — Here’s What Led To The FTX Crypto Crash

<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



Several Wall Street experts are warning that despite moving higher in recent weeks, the stock market still has further to fall—with recent gains likely to be nothing more than a “bear market rally,” as investor concerns about Fed rate hikes and slowing economic growth continue to weigh on markets.



<h2 class="wp-block-heading">KEY FACTS</h2>



Despite an earnings season marked by profit warnings from major companies, the stock market has risen significantly from its low point on June 16, with the S&amp;P 500 gaining roughly 12% and rallying for the last three weeks in a row.&nbsp;



With stocks starting to recover from a brutal selloff in the first half of the year, investors are now debating whether recent gains are merely a bear market rally—with stocks set to hit new lows—or the start of a new bull market.



Analysts at Bank of America argue that it’s “premature to declare a ‘big low’ in the market,” predicting more downside ahead and advising investors to remain “tactically cautious,” especially as the Federal Reserve continues to hike interest rates for the foreseeable future.



The firm describes that many traditional indicators of a market bottom are yet to be triggered—such as rising unemployment, the Federal Reserve starting to lower interest rates, a slowdown in profit estimates and a decline in the two-year Treasury yield.



What’s more, the last three market lows occurred after investors began to sell stocks, which hasn&#8217;t happened just yet: Since the end of June, clients have been net buyers of equities rather than sellers, according to Bank of America.



The unexpectedly&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/05/stocks-fall-despite-strong-jobs-report-as-investors-fear-bigger-fed-rate-hikes/">strong jobs report</a>&nbsp;last Friday, which investors worry will embolden the Fed to continue aggressively raising rates, also signals that the “recent bear market rally” will soon come to an end, according to LPL chief global strategist Quincy Krosby.



<h2 class="wp-block-heading">WHAT TO WATCH FOR:</h2>



The optimism about inflation peaking and a looming “Fed pivot”—where the central bank pulls back from its aggressive tightening of monetary policy—is certainly “<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/02/heres-why-more-fed-officials-are-warning-that-the-market-is-getting-ahead-of-itself/?sh=56e9a86833d1">overdone</a>,” while “nonsensical behaviors” are also returning to the market, according to Vital Knowledge founder Adam Crisafulli. Both factors should “temper” investors’ near-term enthusiasm as they suggest further downside risks—though on the bright side, the U.S. economy is proving “more resilient than it’s being given credit for.”



<h2 class="wp-block-heading">CRUCIAL QUOTE:</h2>



“Investors are increasingly in a game of tug-of-war over bullish and bearish talking points,” says Nationwide chief of investment research Mark Hackett. “Confusion is driving investor decisions,” which generally leads to “directionless volatility,” he warns.



<h2 class="wp-block-heading">TANGENT:</h2>



What can investors do if the market does hit new lows? “Use bear market rallies to raise cash and rotate into higher quality assets,” according to analysts at Bank of America. “Keep dividend and bond coupon reinvestments paused and use tax-loss harvesting techniques ahead of better buying opportunities this year.”



<h2 class="wp-block-heading">FURTHER READING:</h2>



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/05/stocks-fall-despite-strong-jobs-report-as-investors-fear-bigger-fed-rate-hikes/">Stocks Under Pressure Despite Strong Jobs Report As Investors Fear Bigger Fed Rate Hikes</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/02/heres-why-more-fed-officials-are-warning-that-the-market-is-getting-ahead-of-itself/">Here’s Why More Fed Officials Are Warning That The Market Is Getting Ahead Of Itself</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/08/bed-bath--beyond-surges-nearly-40-as-retail-traders-pile-back-into-meme-stocks/">Bed Bath &amp; Beyond Surges Nearly 40% As Retail Traders Pile Back Into Meme Stocks</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/03/dow-jumps-400-points-as-stocks-rebound-thanks-to-solid-earnings-upbeat-economic-data/">Dow Jumps 400 Points As Stocks Rebound Thanks To Solid Earnings, Upbeat Economic Data</a>&nbsp;(Forbes)



By Sergei Klebnikov, Forbes Staff

New York Stock Exchange Opens To Begin The Week

Some Experts Are Warning Of A ‘Bear Market Rally’—Here’s Why Stocks Could Hit New Lows

A pair of twentysomethings from Uganda and Ghana thought there was a fortune to be made bringing transnational financial services to Africa’s 1.2 billion people. With 5 million users, San Francisco-based Chipper Cash is just getting started.



It was the summer of 2018, and Ham Serunjogi, a 24-year-old Ugandan immigrant, thought the pitch he was making to a Palo Alto venture capi­tal firm was going well. He had explained how his fintech startup, Chipper Cash, would enable African consumers to send money to each other, across national borders, more cheaply and easily than the antiquated banking system—a sort of Venmo for the continent.



Then came a question from one of the partners: “Why don’t you go look for donations and grants to fund this?” Because, Serunjogi replied, this will be a profit-making business. The clueless partner persisted: “Why don’t you talk to Unicef or an impact investing firm?” Serunjogi discreetly declines to name the firm, or to say which VC later told him that “regardless of what the metrics are, I have to apply a discount to this business because it’s in Africa.”



Those memories still sting, even though Chipper Cash has now raised $300 million from a roster of blue-chip VCs, most recently in November at a $2.2 billion valuation. “These were things I’d have to take with a straight face. But it was outrageous, and it still is,” Serunjogi says from the San Francisco office where he, cofounder Maijid Moujaled and nearly a fifth of the company’s 350 employees are based. The two founders each have an estimated 10% stake in Chipper, translating into paper fortunes north of $200 million.



Sheel Mohnot, a former partner at 500 Startups—Chipper Cash’s first backer—chalks up some early investor resistance to ignorance about Africa. “No one was investing in Africa at the time,” he says. That has changed. Per CB Insights, venture capitalists invested $1.5 billion in African fintech companies last year, up sevenfold from 2020. Sub-Saharan Africans today have 605 million registered mobile money accounts—with which they can send cash via text message—up from 469 million in 2018. That makes the area fertile ground for more advanced consumer financial apps.



Four years after its founding, Chipper Cash has 5 million registered users in seven countries, including Uganda, Ghana and Nigeria. It offers not only low-cost money transfers but bill payment, crypto trading and the ability to buy U.S. stocks. Excluding crypto transactions, it booked more than $75 million in revenue in 2021, compared with $18 million in 2020.



The idea for Chipper Cash was seeded when high-school-age Serunjogi saw the problems his father encountered trying to move money through Africa’s ossified banking system. Serunjogi’s family lived in Gayaza, a Ugandan town 10 miles outside Kampala, the capital. His parents owned a farm, and his father also ran an IT operation helping local businesses set up networks. Though hardly rich, the family sent Serunjogi and his two brothers to a private high school and enrolled them in a competitive swim club. In 2010, Serunjogi, then 16, made the Ugandan Youth Olympic team. After having problems completing a bank transfer, his father was forced to fly to South Africa with an envelope full of cash to pay his son’s swim coach while they were training there.



After high school, Serunjogi followed his older brother to Grinnell, a small liberal arts college in Iowa known for its strong academics, where both swam varsity. At Grinnell he met Moujaled, a Ghanaian computer science major who had started a popular student coding group. Almost immediately, the two began talking about developing an African money transfer app. But first they wanted real-world tech experience and needed work visas. So during his junior year Serunjogi sent cold emails to Mark Zuckerberg and Sheryl Sandberg and snagged an internship with Facebook, which turned into a full-time job in Dublin after he graduated in 2016.



In the spring of 2018, Serunjogi texted Moujaled, who was working as a software engineer in San Francisco, to say it was time to get going. Serunjogi quit his job and moved into Moujaled’s studio apartment, sleeping on an air mattress in the kitchenette. The two used their combined savings of less than $30,000 and Moujaled’s ongoing salary as seed capital. They&nbsp;<a href="https://digestafrica.com/chipper-cash-money-whatsapp" target="_blank" rel="noreferrer noopener">launched</a>&nbsp;a test version of their app in July 2018, letting customers send money from Uganda to Ghana for free.



They took pitches to more than 50 VC firms until, in November 2018, 500 Startups agreed to invest $150,000. Before the papers were signed, Mohnot wired $40,000 to Chipper after Serunjogi told him he was about to miss rent. “I will be eternally grateful to him for that,” Serunjogi says.



Chipper’s free, easy-to-use app was a big improvement over the available alternatives. For example, Kenya’s M-Pesa, which launched in 2007, charges <a href="https://www.safaricom.co.ke/personal/m-pesa/m-pesa-rates" target="_blank" rel="noreferrer noopener">1% to 2%</a> for many domestic transfers.



By mid-2019 Chipper Cash was available in Uganda, Ghana, Kenya and Rwanda. It soon expanded to Nigeria, Africa’s biggest market with more than 200 million people, and by the end of the year, it had 600,000 customers. It also introduced a foreign-exchange markup fee of 2% to 5% to start generating revenue. As bitcoin rose from $14,000 to $20,000 in the fall of 2020, Chipper began to let users buy and sell bitcoin and ether, establishing a second lucrative line of business: trading fees. It reached a $2.2 billion valuation in late 2021, with investment from firms including Sam Bankman-Fried’s FTX, Ribbit Capital and Bezos Expeditions. Transactions grew from $200 million in the first quarter of 2021 to $1.6 billion 12 months later.



All that growth comes with added high-stakes challenges. One is liquidity: Chipper needs to make sure it has enough funds in each country to support instant transfers. When it doesn’t, transaction times can slow to a full day or longer. Money can solve that problem. A bigger worry is competition. Senegal-based startup Wave offers similar services (albeit in different countries so far) and notched a&nbsp;<a href="https://techcrunch.com/2021/09/06/sequoia-heritage-stripe-and-others-invest-200m-in-african-fintech-wave-at-1-7b-valuation/" target="_blank" rel="noreferrer noopener">$1.7 billion</a>&nbsp;valuation last year. Other remittance companies such as Remitly and Wise don’t yet let people send money from one African country to another, but there’s nothing stopping them from entering the market.



For now, Serunjogi is focused on maintaining Chipper’s steep growth, moving to profitability—and helping Africans while doing so. Customers benefit, he says, when they can move money easily and have new ways to invest and build wealth. “I’m a deep believer in the role of entrepreneurship and capitalism in improving the lives of people who live in developing countries.”



By Jeff Kauflin, Forbes Staff

Screenshot 2022-06-07 at 09.24.29

How Two Africans Overcame Bias To Build A Startup Worth Billions

The new pan-African payment and settlement system launched recently is to reduce cross-border payment fees and transaction delays across the continent, and eventually help businesses scale.



WHETHER IT’S A HARD-WORKING MIGRANT remitting funds home to his family or a trader making a cross-border payment, sending money within Africa has been hitherto costly and slow. But a new pan-African endeavour might change both for the better reducing the reliance on foreign currency.



“It is set to save the continent up to $5 billion annually, which is the amount currency convertibility costs Africa,” said Benedict Oramah, Afreximbank President, about the initiative in January in Accra, Ghana.



The Pan-African Payment and Settlement System (PAPSS), a centralized payment and settlement infrastructure for intra-African trade and commerce payments developed with Afreximbank and the African Continental Free Trade Area (AfCFTA) secretariat, is set to allow for quick cross-border payments, reducing the reliance on the US dollar, UK pound and the delays these currencies incur. This follows a successful trial in the West African Monetary Zone (Nigeria, Ghana, Liberia, Sierra Leone, the Gambia and Guinea).



Currently, of the 42 currencies on the continent, few have value outside their country. AfCFTA is trying to bring together all 54 African countries to trade under a single market with liberalized tariffs and the removal of non-tariff barriers to cross-border trading.



Thirty nine countries are onboard so far, Secretary-General of AfCFTA, Wamkele Mene, has said.



“PAPSS is designed to be a fundamental rail connecting African markets to each other and enabling individuals, businesses and governments on the continent to trade with each other seamlessly.



PAPSS will provide fresh impetus for businesses to scale more easily across Africa, essentially eliminating the borders that have balkanized us and robbed us of our economic prosperity for so long,” said Mike Ogablu III, CEO of PAPSS, at the operational roll-out of PAPSS on September 28 last year.



PAPSS claims it aims to ease the transactional burden on consumers. Prior to this, local currencies had to be converted into hard currencies, with transfers taking days. PAPSS attests that compliance, legal and sanction checks are performed instantly, and near-instant payments processed in 120 seconds.



Dominating news over the last two years, cryptocurrency is the new lexicon for money. How would the crypto world see this? Speaking with FORBES AFRICA, Blockonomics, a decentralized Bitcoin payment solution, offers how crypto and initiatives like PAPSS can work for greater financial freedom for Africa.



Blockonomics is trying to solve the problem of long waits and fees from a different direction.



Its VP of Growth Frederick Coleman says the decentralized nature of crypto exchange is just another avenue for Africans to use, as Bitcoin transcends borders.



“In conjunction, cryptocurrency and centralized initiatives like PAPSS can work, expanding the rights and horizons of people. Initiatives like PAPSS are needed; it doesn’t matter where it comes from, as long as people benefit,” says Coleman.



Forbes reports that mobile money transactions in Africa amounted to nearly $500 billion during the pandemic.



Mobile remittances in Africa will likely be positively impacted the most by PAPSS. In the past, Africans have had to find alternatives to traditional banks to make cross-border payments to friends and family.



Cash is still king on the continent. Oliver O’Brien, Executive Head of Strategy and Business Development at Mukuru, a money transfer provider in Africa, says PAPSS will allow access to online networks for cash-dependent clients. O’Brien says it may assist people on the journey from the informal to the formal, digital economy.



“Mukuru is very excited about the launch of the PAPSS. Systems like these that offer fast, affordable bank-to-bank (digital) cross-border transactions disrupt the existing slow, costly international payment networks that typically only cater for high-value bank transfers,” says O’Brien.



US based mobile payments company Boku, which has a strong presence in Africa, concurs.



“The creation of PAPSS is no doubt a good thing for everyone involved in the African economy, including payments providers. Boku is in favor of anything that enables more freeflowing movement of funds, especially across borders,” says Josh Gosliner, Boku’s Head of Marketing and Communications.



Prospects for a more unified African economy may begin with PAPSS, and time will tell if this means greater financial inclusion for traders, migrants and the majority of informal entrepreneurs thriving in Africa’s innards.

Closeup of young female hands holding smartphone and bank card while making online payment in cafe drinking coffee

The Newly Launched Payments System Set To Save Africa $5 Billion Annually

Close up of businesswoman checking financial stock market analysis with mobile app on smartphone on the go, against illuminated corporate skyscrapers in financial district at night. Financial investment, stock market and exchange, accounting concept

Fintech’s Fraud Problem: Why Some Merchants Are Shunning Digital Bank Cards

TOPLINE More than two years after its IPO plans unraveled in spectacular fashion, WeWork began publicly trading on the New York Stock exchange on Thursday, with shares rising after merging with a special purpose acquisition company.



<h2 class="wp-block-heading" id="h-key-facts">KEY FACTS</h2>



Trading under the ticker “WE,” WeWork shares rose by 13% on Thursday.



WeWork raised $1.3 billion by going public with blank check company BowX Acquisition Corp., which is headed by Sacramento Kings owner and tech entrepreneur Vivek Ranadive, in a deal that was first announced in March.



The company’s roughly $9 billion valuation is a steep drop from 2019, when WeWork was valued at $47 billion by SoftBank Group during its initial efforts to go public that year.



As part of the deal, SoftBank, which spent $10 billion to acquire an 80% stake in WeWork and save it from a cash crunch in October 2019, will&nbsp;<a href="https://www.reuters.com/article/us-wework-m-a-bowx-acquisition-idTRNIKBN2BI1F4" target="_blank" rel="noreferrer noopener">retain</a>&nbsp;its majority stake in the company.



Filings show that WeWork is still losing money: $3.5 billion in 2019, $3.2 billion in 2020 and $2.1 billion in the first quarter of this year alone, which&nbsp;<a href="https://www.ft.com/content/b0c047d0-6e7e-42c1-89c8-ee5f96d01a12" target="_blank" rel="noreferrer noopener">included</a>&nbsp;a non-cash settlement of around $500 million with former CEO Adam Neumann, per a&nbsp;Financial Times&nbsp;report.



WeWork posted $3.2 billion in sales in each of the last two years (excluding its China operations, which it sold a majority stake of last year) and expects to do so again in 2021, according to an&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/0001813756/000119312521095509/d29340dex992.htm" target="_blank" rel="noreferrer noopener">investor presentation</a>&nbsp;BowX filed with the Securities and Exchange Commission.



The real estate and workspace firm does expect its revenue to start growing again, however, targeting $4.6 billion next year and about $7 billion by 2024.



<h2 class="wp-block-heading" id="h-crucial-quote">CRUCIAL QUOTE</h2>



“This company is here, is stronger than ever, and no doubt that we’re going to be celebrating many more milestones,” WeWork’s executive chairman, Marcelo Claure, <a href="https://www.cnbc.com/2021/10/21/wework-goes-public-through-spac-.html" target="_blank" rel="noreferrer noopener">told</a> CNBC on Thursday morning. “Two years ago, the value of WeWork was zero and the fact we’ve taken it from zero to $8 billion to $9 billion is great.”



<h2 class="wp-block-heading" id="h-big-number-1-6-billion">BIG NUMBER: $1.6 BILLION.</h2>



That’s how much WeWork founder Adam Neumann is&nbsp;<a href="https://www.forbes.com/sites/mattdurot/2021/10/21/weworks-ousted-cofounder-adam-neumann-regains-billionaire-status-as-company-goes-public-via-spac/?sh=3146076622a6">worth</a>&nbsp;after the company went public on Thursday, according to&nbsp;Forbes’ estimates. While down from the $4.1 billion he was worth during WeWork’s peak in 2019, it’s still enough to make him a billionaire for the first time in two years.



<h2 class="wp-block-heading" id="h-what-to-watch-for">WHAT TO WATCH FOR:</h2>



Neumann still has some voting power and owns an estimated 7% stake, or around 48.5 million shares, of the newly public company through an entity he controls.



<h2 class="wp-block-heading" id="h-key-background">KEY BACKGROUND:</h2>



WeWork’s original plans to go public via the traditional IPO route imploded in disastrous fashion two years ago. Starting in August 2019, the company’s IPO filing revealed that it had lost $1.9 billion in 2018 and was on track to burn through its remaining cash. The company’s visionary founder, Adam Neumann, was&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2019/09/24/embattled-wework-founder-adam-neumann-steps-down-as-ceo/?sh=3803c6c07fed">ousted</a>&nbsp;as CEO shortly after in September 2019, following reports of irregular corporate governance and self-dealing. WeWork’s new leadership quickly&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2019/09/30/weworks-new-leadership-officially-cancels-ipo-plans/?sh=3a54b4d165c5">cancelled</a>&nbsp;the planned IPO as investors grew increasingly concerned about the company’s precarious financial position. Facing huge losses that put it on the verge of financial collapse, WeWork was eventually bailed out by its largest shareholder, Japanese conglomerate SoftBank, which provided a $10 billion lifeline to acquire an 80% stake in the company. WeWork’s valuation progressively dropped since, to $7.3 billion at the end of 2019 and $2.9 billion in early 2020.



<h2 class="wp-block-heading" id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/mattdurot/2021/10/21/weworks-ousted-cofounder-adam-neumann-regains-billionaire-status-as-company-goes-public-via-spac/?sh=21735b22a6ca">WeWork’s Ousted Cofounder Adam Neumann Regains Billionaire Status As Company Goes Public Via SPAC</a> (Forbes)



By Sergei Klebnikov, Forbes Staff

WeWork Debuts Goes Public On New York Stock Exchange

WeWork Shares Rise 13% After Going Public Via SPAC Merger

By:<a href="https://www.forbes.com/sites/forbesagencycouncil/people/briandevans1/">Brian D. Evans</a> | Forbes Councils Member



<h4 class="wp-block-heading" id="pressboard-ad-sponsorship-tag_1634734872602">Inc 500 Entrepreneur. NFT Enthusiast &amp; Consultant. Founder at <a href="https://www.inc.com/profile/bde-ventures/" target="_blank" rel="noreferrer noopener">BDE Ventures</a>, a marketing and consulting agency.</h4>



Unless you&#8217;ve been living under a rock, such as the EtherRock that recently&nbsp;<a href="https://www.cnbc.com/amp/2021/08/23/people-are-paying-millions-of-dollars-for-digital-pictures-of-rocks.html" target="_blank" rel="noreferrer noopener">sold for&nbsp;</a>$1.3 million, you&#8217;ve probably heard about non-fungible tokens&nbsp;(NFTs). NFTs have become the rage on the internet, offering a novel opportunity for creators, artists and developers. With tons of projects and tokens, the NFT subsector is<a href="https://www.reuters.com/technology/nft-sales-volume-surges-25-bln-2021-first-half-2021-07-05/" target="_blank" rel="noreferrer noopener">&nbsp;worth billions of dollars</a>, making it a fast-growing subsector in the cryptocurrency and blockchain scene.



NFTs aren&#8217;t just valuable economically. They&#8217;re also revolutionary when it comes to branding. Projects such as CryptoPunks, Bored Ape Yacht Club (BAYC), Koala Intelligence Agency, Art Blocks, CyberKongz&nbsp;and many more are changing brand-building approaches.&nbsp;The days of physical brand building, which has helped companies such as Nike, Gucci, etc., create their followings, is being replaced by a digital metaverse with a cult following.



CryptoPunks and BAYC NFTs (both of which I own at least one of) have created communities of core enthusiasts that are rarely seen with mainstream brands. For instance, it&#8217;s rare to find someone changing their profile picture to a new Nike kicks or Patek watch, no matter how valuable those assets are. But on Twitter, you can find many people&nbsp;<a href="https://www.newyorker.com/culture/infinite-scroll/why-bored-ape-avatars-are-taking-over-twitter" target="_blank" rel="noreferrer noopener">changing their profile pictures</a>&nbsp;to avatars of their favorite NFT project.



These vibrant communities help in increasing the value of NFTs. Today, the most popular NFTs are worth more than a small house in some parts of America. For instance, CryptoPunks tokens, pixelated humanoid characters that were&nbsp;<a href="https://www.cnbc.com/2021/05/12/christies-sold-cryptopunks-nfts-collection-for-millions.html" target="_blank" rel="noreferrer noopener">given away for free back in 2017</a>, were worth a minimum of about $400,000 when I wrote this.MORE FOR YOU<a href="https://www.forbes.com/sites/tracybrower/2021/09/19/empathy-is-the-most-important-leadership-skill-according-to-research/">Empathy Is The Most Important Leadership Skill According To Research</a><a href="https://www.forbes.com/sites/carolinecastrillon/2021/09/22/why-us-talent-shortages-are-at-a-ten-year-high/">Why U.S. Talent Shortages Are At A 10-Year High</a><a href="https://www.forbes.com/sites/tracybrower/2021/09/26/you-probably-need-more-friends-heres-how-to-make-them/">You Probably Need More Friends—Here’s How To Make Them</a>



As a consultant with my own agency, I see a lot of projects early on. Every successful NFT project adopts different but similar brand-building strategies. These strategies have helped create a vibrant community for them, which means more awareness and mainstream interest. But despite the current popularity and value of the NFT sector, I think there&#8217;s still plenty of room for improvement in approach and technology.



<h2 class="wp-block-heading">Access And Utility&nbsp;</h2>



NFTs as access passes are a growing theme. This is when owning an NFT gives the holder access to certain benefits. Such benefits range from being part of an exclusive club to real-life benefits such as having access to certain works or events and even access to stories are part of it for some. One interesting case is VeeFriends. (I own a VeeFriend as well.) Gary Vaynerchuk created the collection of 10,255 tokens, and holders will be able to&nbsp;<a href="https://www.prnewswire.com/news-releases/gary-vaynerchuk-releases-his-first-nft-collection-veefriends-301284312.html" target="_blank" rel="noreferrer noopener">attend VeeCon</a>&nbsp;for the next three years.



Here are three access and utility strategies for those getting involved in NFT marketing:



• First, improve access by stacking on the benefits and quality of what the end user gets access to.



•&nbsp;Next, you can improve the technology itself to have NFTs more closely integrated with &#8220;opening the doors&#8221; — meaning nothing else is needed but the NFT itself to physically grant the access.



• Last, the NFT utility that we see today probably won&#8217;t be the utility we see in five years. We&#8217;re in for a lot of innovation in the coming years, and you can capitalize by being more creative than the next person.



<h2 class="wp-block-heading">Rarity And Exclusiveness</h2>



NFTs easily create scarcity, which has made the assets more valuable. For instance, CryptoPunks and BAYC have&nbsp;<a href="https://www.theverge.com/2021/8/26/22639353/cool-cats-bayc-generative-nft-profile-avatar" target="_blank" rel="noreferrer noopener">only 10,000 NFTs each</a>, and this rarity means anyone who owns them is part of an exclusive group. Not only does it make the NFTs more attractive to others, but it also makes the owners want to flaunt them.&nbsp;



BAYC has many different &#8220;traits&#8221; (visual properties) for its 10,000 NFTs. Food for thought for builders would be to make a few hundred NFTs with 10,000 traits or some outrageous change from the current norm.



<h2 class="wp-block-heading">A Die-Hard Community</h2>



NFT projects usually focus on creating a strong community before anything else. They use strategies such as community engagement, opinion polls, extra benefits and more. Gala Games also&nbsp;<a href="https://www.prnewswire.com/news-releases/gala-games-and-opera-announce-multi-level-partnership-to-create-carbon-neutral-nfts-301322430.html" target="_blank" rel="noreferrer noopener">has NFTs</a>, but it takes customer service to new levels and has one of the most engaged and helpful Discord servers I have ever seen.



Establishing communities for NFT projects really comes down to getting buy-in from your audience. Make sure they fall in love with your NFT, story or project. Focusing on your first 1,000 fans can carry you very far in reaching a wider audience.



<h2 class="wp-block-heading">Fun, Interactive And Meaningful Experience</h2>



Another way NFT projects go about brand building is by offering members an interactive and fun experience. Koala Intelligence Agency perhaps does the best job of this, by&nbsp;<a href="https://finance.yahoo.com/news/nft-collection-koala-intelligence-agency-090102495.html" target="_blank" rel="noreferrer noopener">making its tokens &#8220;agents&#8221;</a>&nbsp;and&nbsp;<a href="https://stockhead.com.au/cryptocurrency/nft-alpha-how-to-find-the-next-pudgy-penguins-is-it-koala-intelligence-agency/" target="_blank" rel="noreferrer noopener">giving owners missions</a>. It feels like a secret club that people want to be a part of.



User experience and story buy-in are key. You want NFT owners to feel like they&#8217;re part of the experience. Find ways to make each person feel special, and like they&#8217;re part of the story.



<h2 class="wp-block-heading">The Potential Of NFT Projects</h2>



Given the value that many NFT projects already have, their brand appeal will likely only increase with time, and they can create a metaverse as popular Nike. Already, NFT projects are gaining mainstream interest from celebrities and sports stars.



Even mainstream brands are watching the NFT scene. For example,&nbsp;<a href="https://thenextweb.com/news/nike-blockchain-sneakers-cryptokick-patent" target="_blank" rel="noreferrer noopener">Nike patented CryptoKicks</a>, and other consumer brands such as&nbsp;<a href="https://www.morningbrew.com/marketing/stories/2021/10/06/agencies-are-figuring-out-how-to-safely-guide-brands-through-the-wild-world-of-nfts" target="_blank" rel="noreferrer noopener">Coca-Cola</a>,&nbsp;<a href="https://www.businessinsider.com/taco-bell-potatoes-return-celebrated-with-nft-crypto-collectibles-2021-3" target="_blank" rel="noreferrer noopener">Taco Bell</a>&nbsp;and&nbsp;<a href="https://www.highsnobiety.com/p/asics-nft-sunrise-red-collection/" target="_blank" rel="noreferrer noopener">ASICS</a>&nbsp;have used NFTs as part of their marketing strategies. Similarly, NFT projects are already getting mainstream coverage. For instance, CryptoPunks&nbsp;<a href="https://www.hollywoodreporter.com/business/digital/uta-cryptopunks-nft-film-tv-vieo-games-1235005392/" target="_blank" rel="noreferrer noopener">recently signed a deal</a>&nbsp;with United Talent Agency to let the agency represent the project for TV, games and other media. Thus, NFT projects are already on the path to becoming global brands, led by art, incredible marketing and community building.



If you&#8217;re getting involved in creating and marketing NFTs, the thing to keep in mind is deep involvement from your audience. If you can get your audience on your team and out there championing you in a big way, you&#8217;re much more likely to make it.



<hr class="wp-block-separator"/>



Follow me on&nbsp;<a href="https://www.twitter.com/BrianDEvans" rel="noreferrer noopener" target="_blank">Twitter</a>&nbsp;or&nbsp;<a href="https://www.linkedin.com/in/briandevansla" rel="noreferrer noopener" target="_blank">LinkedIn</a>.&nbsp;Check out&nbsp;my&nbsp;<a href="https://www.inc.com/profile/bde-ventures/" rel="noreferrer noopener" target="_blank">website</a>.&nbsp;<a href="https://www.forbes.com/sites/forbesagencycouncil/people/briandevans1/"></a><a href="https://www.forbes.com/sites/forbesagencycouncil/people/briandevans1/">Brian D. Evans</a>



Inc 500 Entrepreneur. NFT Enthusiast &amp; Consultant. Founder at&nbsp;<a href="https://www.inc.com/profile/bde-ventures/" target="_blank" rel="noreferrer noopener">BDE Ventures</a>, a marketing and consulting agency.&nbsp;<a href="https://profiles.forbes.com/u/a07bec07-5dff-47ea-9653-14b56a7dab7d" target="_blank" rel="noreferrer noopener">Read Brian D. Evans&#8217; full executive profile here.</a>…&nbsp;Read More

https___specials-images.forbesimg.com_imageserve_616d768ccc747e86ac6729d8_NFT_960x0

How To Make An NFT Project As Popular As Nike

Abi Mustapha-Maduakor, the CEO of the African Private Equity and Venture Capital Association (AVCA), on what lies ahead for fintech in Nigeria.



Q. There has been significant activity in the African tech ecosystem. Do you see this sector growing, at least in terms of diversity of funding for fintech startups in Nigeria? Are there any figures to quantify or further illustrate this?



<meta charset="utf-8">Abi Mustapha-Maduakor (AMM): Technology has developed into one of the highest interest emerging sectors for private equity and venture capital investment in Africa. According to AVCA’s Sector Snapshot on Technology, published in April 2021, there were 572 reported Private Equity (PE) and Venture Capital (VC) fund investments in technology in Africa between 2015- 2020, totaling $6.5 billion. Technology has certainly disrupted various sectors on the continent resulting in the development of innovative homegrown solutions to address challenges therein. In 2020, investments



in technology and tech-enabled companies operating across a variety of sectors accounted for 55% of the total PE and VC deals recorded in Africa, according to AVCA’s 2020 Annual African Private Equity Data Tracker. The sector is poised for exponential growth as the continent catapults further into a digital revolution, bringing efficiency, reducing fragmentation and driving innovation within and across entire sectors. The improving depth and breadth of digital connectivity on the continent is gaining international recognition: eight of the 25 economies identified as outperformers (countries with high Global Innovation Index scores relative to their level of economic development) in the 2020 edition of the Global Innovation Index were from sub-Saharan Africa. These strides towards digitalization across the continent will catalyze further public and private investment in the sector. Nigeria attracted 14% of PE and VC fund investment in Africa’s technology sector (2015-2020) and we expect this trend to continue going forward. Particularly, the fintech industry in Nigeria experienced significant increase in 2020 and attracted increasing [interest] from a wide range of domestic and institutional investors. In 2020, fintech companies in Nigeria raised $112 million from investors; we can certainly expect to see an increase in commercial capital allocated to the same.



In particular, fintech in Nigeria is attracting significant investor interest. In 2020, fintech startups headquartered in Nigeria raised capital from investors based in the United States, Nigeria, United Kingdom, Japan, Singapore, Ghana, and Morocco to name buta few. The sector is further fueled by a number of growth drivers. Regulatory changes were a key enabler to growth in the fintech industry in Nigeria in 2020. The Central Bank of Nigeria implemented the Regularity Sandbox, allowing CBN-licensed firms to live test new and innovative products in a controlled environment before launching their products to the public. This push to create a strong and dynamic digital finance ecosystem set Nigeria on a positive path to receiving diverse and multiplied funding for startups in the fintech space.



Q. Do you see momentum picking up for the fintech industry in Nigeria going forward this year too with Covid?



AMM: The Covid-19 pandemic was not a headwind but rather a catalyst for innovation in Africa’s tech ecosystem. Although the pandemic ushered a period of subdued investment activity in Africa, this lull in deal-making was short-lived. By mid-2020, investors were exhibiting renewed confidence in the continent, and the year saw several PE and VC deals benefitting fintech startups. Examples include the $60 million Series B investment round in Thunes led by Helios Investment Partners and the $30 million Series B investment in Chipper Cash.



Examples of late-stage PE deals in the second half of 2020 include the $30 million investment in mobile-technology insurer BIMA by Leapfrog and other investors in September 2020, as well as the $20 million investment in digital payment solutions provider Global Accelerex by African Capital Alliance in November 2020. Looking ahead to 2021, we can expect the pace and volume of technology investment in Africa to continue gaining momentum. Fintech startups Chipper Cash and Flutterwave, the two most recent additions to the continent’s limited breed of ‘unicorns’ (startups that reached a $1 billion valuation), both successfully raised $100 million + Series C funding rounds in 2021. 



Long-term growth fundamentals remain in place driving the expansion of technology in Africa. Within the fintech space, the rapid growth of mobile and internet penetration in sub-Saharan Africa, coupled with challenges related to traditional banking infrastructure and services in the region, have laid the foundations for fintech to flourish and transform the financial services sector on the continent. According to AVCA’s 2020 Annual African Private Equity Data Tracker, financial technology accounted for 70% of the total number of deals within the financial sector in 2020, and consistently attracts a significant proportion of the value of private equity funding channeled to the continent.



We expect this trend to persist into 2021.

Abi Mustapha-Maduakor

Fintech Is On A Positive Path

Last year, PayPal&nbsp;<a href="https://www.forbes.com/companies/paypal" target="_blank" rel="noreferrer noopener">PYPL</a>&nbsp;<a href="https://www.forbes.com/companies/paypal">+0.6%</a>&nbsp;CEO Dan Schulman commissioned a study to understand how many of his employees were financially strapped. “I was almost positive the response would be, ‘No, we’re not, because you’re paying so well,’” Schulman said Wednesday at Forbes’ JUST 100 virtual summit. Internal research had shown that staff salaries were at or above market rates.



But the study’s results painted a different picture. “In all of our call centers and among our entry-level employees—more than 10,000 people inside of PayPal—two-thirds of that employee base struggled to make ends meet. That was such a huge wake-up call for me,” he said.&nbsp;



Hedge fund manager and philanthropist Paul Tudor Jones II spoke on the panel with Schulman and noted that, for every year he has done research for the&nbsp;<a href="https://www.forbes.com/just-companies/#11977d772bf0">JUST 100 list</a>&nbsp;of the most responsible public companies, “The number-one element of what makes a just company is pay and living wage.” The research polls thousands of Americans to identify what factors they deem most important in defining fair corporate behavior.



In October 2019, Schulman responded to the troubling survey results by lowering the cost of healthcare for employees by 60%. He gave every worker equity in PayPal, raised salaries and rolled out a financial education program to encourage saving. The changes reportedly cost <a rel="noreferrer noopener" href="https://www.fastcompany.com/90490899/how-paypal-ceo-dan-schulman-is-leading-a-more-inclusive-way-forward" target="_blank">tens of millions</a> of dollars. 



ee if the changes had an impact. “Employees were four times more engaged, and three times less likely to leave the company,” Schulman said.



Higher morale creates a workforce that serves customers better and leads to better shareholder returns, the CEO believes. His company’s stock has risen nearly 90% this year, reaching a market value of $235 billion. “This idea that making a profit and having a purpose as a company are at odds with each other is fundamentally wrong. I actually think if you don&#8217;t have a purpose as a company, you don’t see your workers as your most valuable asset and you minimize your profitability.”



-By Jeff Kauflin, Forbes Staff

Fast Company Innovation Festival – Day 3

PayPal CEO Dan Schulman Explains His Strategy For Investing In Employees’ Financial Health

After record production cuts in April intended to prop up the market amid a demand crisis caused by the coronavirus pandemic, the world’s largest oil producers are <a rel="noreferrer noopener" href="https://www.nytimes.com/2020/07/12/business/economy/opec-russia-oil-production-coronavirus.html" target="_blank">expected</a> to ease up on the restrictions and begin to increase their output next month.



KEY FACTS



<ul><li>Saudi Arabia, Russia, and the other members of OPEC+ will meet Wednesday to discuss the current market situation and debate future production limits, the Wall Street Journal <a rel="noreferrer noopener" href="https://www.wsj.com/articles/opec-allies-set-to-ease-oil-cuts-seeing-pandemic-recovery-11594510347" target="_blank">reported</a> over the weekend, adding that most delegates in the organization support loosening restrictions.</li></ul>



<ul><li>As lockdown measures ease across the globe, demand for oil is slowly beginning to rise again as shipping and air travel resume. </li></ul>



<ul><li>Oil prices are still down significantly from pre-pandemic levels, however, with the Brent international benchmark priced at about 30% of January levels. </li></ul>



<ul><li>The International Energy Agency said Friday that while global demand for oil had recovered strongly in China and India in May, world demand is still projected to decline during the second half of the year before recovering in 2021. </li></ul>



<ul><li>The recent spike coronavirus cases and new lockdowns are creating “more uncertainty”: additional lockdowns could discourage travel and international trade, which would put more downward pressure on prices.</li></ul>



<ul><li>The risk to the oil market is “almost certainly to the downside,” the IAE said. </li></ul>



KEY BACKGROUND



In April, the members of the Organization of Petroleum Exporting Countries (OPEC) and its allies&nbsp;<a href="https://www.forbes.com/sites/sarahhansen/2020/04/09/saudi-arabia-and-russia-agree-to-historic-oil-production-cuts-but-they-may-not-be-enough-to-rescue-the-market/#63cf1d8c641a">agreed to record oil production cuts</a>&nbsp;of 9.7 million barrels a day as the coronavirus decimated global demand for crude oil. The agreement put an end to a weeks-long price war between Russia and Saudi Arabia that added even more pressure to an already-struggling market.&nbsp;



CRUCIAL QUOTE



“If OPEC clings to restraining production to keep up prices, I think it’s suicidal,” a person familiar with Saudi Arabia’s thinking told the Journal. “There’s going to be a scramble for market share, and the trick is how the low cost producers assert themselves without crashing the oil price.”



 &#8211; <a href="https://www.forbes.com/sites/sarahhansen/">Sarah Hansen</a>, Forbes Staff, <a href="https://www.forbes.com/markets">Markets</a>

Preis für Rohöl an der Börse

OPEC And Its Allies Are Ready To Boost Production, But Here’s Why An Oil Market Recovery Isn’t Guaranteed

People’s safety concerns about transmission through contact has resulted in Covid-19 becoming a catalyst for the adoption of cashless payments globally and even more so in South Africa, with the disruption expected to effect lasting changes in the way people transact with cards and cash.  



While consumers had already begun to embrace digital payment options prior to the pandemic, the health crisis is rapidly accelerating the adoption rate with more consumers seeking safer, contact-free payment methods.



This rapid adoption of digital payments will help shape a new normal as businesses begin to emerge from the more stringent levels of lockdown regulations and attempt to navigate their post-Covid-19 futures.



Derek Cikes, Commercial Director at Payflex, says the pandemic represents a watershed for the payments industry.



“The acceleration towards a cashless society is one of the key opportunities that has emerged from the pandemic, bringing the advantages of digital payments&nbsp; to the fore including lower fees,&nbsp; convenience, seamless delivery, greater security, and more flexible payment options,” says Cikes who adds that what makes this trend so interesting, is that historically, people used to hoard cash in times of crisis. Now, the opposite is occurring.



<a rel="noreferrer noopener" href="http://newsroom.mastercard.com/mea/press-releases/mastercard-study-shows-south-african-consumers-make-the-move-to-contactless-payments-for-everyday-purchases-seeking-touch-free-payment-experiences/" target="_blank">A study</a> by MasterCard revealed that since the beginning of Covid-19 in South Africa, 89 percent of South African respondents have been using contactless methods to pay for groceries, 60 percent for pharmaceutical items, 39 percent for other retail items, 15 percent for fast food, and eight percent for transport.



Similarly, recent figures from <a rel="noreferrer noopener" href="https://www.bain.com/insights/the-covid-19-tipping-point-for-digital-payments/" target="_blank">Bain</a> echo this, with estimates that by 2025, the adoption of digital payments could accelerate by a 5 &#8211; 10 percentage point increase globally, above what was previously anticipated at 57% before Covid-19 to 67% after Covid-19.   



Are contactless payments here to stay?



Cash is perceived as a vehicle for the transmission of the virus.&nbsp;As stores, restaurants and other merchants begin to open their doors again, contactless payments are key in providing consumers with a much-needed sense of comfort and reassurance.



 “Businesses have no option but to rethink their use of shared payment surfaces, with customers more conscious than ever of what they touch. People don’t want to touch ATM or PIN pads or have to hand their cards to store tellers.&nbsp; Once viewed as a convenience or nice-to-have, digital payments are now viewed as a critical service, providing a solution to limiting contact with other surfaces,” says Cikes.



Creation of new payment habits



From banking facilities like tap-to-pay, payment apps such as Zapper and Snapscan, to digital banking&nbsp;and&nbsp;e-wallet providers, South African fintech firms have reported significant increases in the use and adoption of digital payment methods since the outbreak began in March. The simple truth is, while these channels provide a convenient way of paying, they are also contactless, allowing consumers to pay for their goods while not having to exchange cash or cards with merchants.



“The perception of cards and cash as vehicles for transferring microorganisms has changed how people physically interact with their payments in favour of contactless options. With health and safety being top priorities, we anticipate this trend to become more permanent with hygiene measures and social distancing likely to become part and parcel of our daily realities for years to come,” says Cikes.



Retailers drive adoption of digital payments



Both online and brick and mortar retailers are helping to accelerate this trend with stores like Mr Price enabling consumers a contactless way to pay in-store pay via their app, and most South African retailers offering tap-to-pay-methods.&nbsp;There is also an expected uptick in omnichannel capabilities (being able to sell your goods through many channels such as website, app, retail, third-party platforms such as Amazon or Shopify) which bridges payments in any environment, physical or digital.



Another contactless payment method driving this trend is e-wallets with over&nbsp;<a href="https://www.theafricareport.com/25846/africa-over-500-million-mobile-money-users-expected-in-2020/" target="_blank" rel="noreferrer noopener">500 million mobile money</a>&nbsp;users expected on the continent in 2020. In addition, it is anticipated that the capabilities of digital wallets will expand to offer features such as digital IDs and transaction monitoring and reporting, which is expected to create even more growth for this payment mechanism.



 Flexibility needed more than ever



According to&nbsp;<a href="https://www.transunion.com/blog/financial-hardship-study/South-Africa" target="_blank" rel="noreferrer noopener">TransUnion’s Financial Hardship Survey</a>,&nbsp;conducted in the United States, United Kingdom, Canada, India, Hong Kong and South Africa, one in six people lost their job in early May, with defaulting on their bills just seven weeks away. 82% of consumers indicated their household income had been impacted, and on average, consumers who were impacted, expect they will be short by R 7 542.90 when paying bills or loans.



“Many people are financially stretched and need the support of alternative payment solutions to help manage their cash flow without incurring further credit card debt,” says Cikes.



A report by&nbsp;<a href="https://blog.globalwebindex.com/trends/coronavirus-international-study/" target="_blank" rel="noreferrer noopener">GlobalWebIndex&nbsp;</a>shows that 83% of South African consumers are expecting flexible payment options from brands.



“We have seen this play out in the increased uptake of our Payflex&nbsp;Buy Now Pay Later&nbsp;payment solution, which allows people to make interest-free payments over two paychecks,” says Cikes.



With health, safety and financial security at the forefront of consumer sentiments, companies will need to provide payment options which meet these consumer needs.



“Digital payment solutions provide an avenue which safeguards against physical interaction, enabling both consumers and business to navigate the environment as the economy is restarted.&nbsp; These digital adoptions will not only help manage the current situation but will also have far-reaching benefits, facilitating a more customer-centric, efficient and resilient economy,” concludes Cikes.



-Derek Cikes, Commercial Director, Payflex

Financial technology concept.

Op-Ed: From Cashless To Digital: The Covid-19 Tipping Point

When Citigroup opened 2020, the most ambitious projects at the $2.2 trillion in assets lender involved major partnerships with technology companies best known for their internet, social media and ecommerce platforms.&nbsp;



In China, nearly 70% of the payments that Citigroup handles for customers are done through AliPay, the payments business spawned by Alibaba. Citigroup’s digital payments technologies are also present on other popular social messaging platforms like LINE and WeChat. The mega-lender recently launched a credit card partnership with fintech Paytm in India and in Singapore it uses chatbots on Facebook Messenger to help answer customer service inquiries. In November 2019, the bank made a big splash in the United States by unveiling a digital checking account with Google Pay.



These partnerships are part of a new reality for the banking industry’s most important players like Citigroup: Innovative and seamless digital banking capabilities are paramount in a business where basic financial products have become commoditized and rock-bottom interest rates make it hard for lenders to differentiate. Consumers are instead voting with their smartphones, demanding the ability to conduct their financial activities safely and easily on mobile phones and their desktops.



Never were these growing demands more important than during the coronavirus pandemic, which forced countries around the world to announce lockdowns to combat the spread of the virus. Unable to visit bank branches, consumers turned to mobile apps and online services to get transactions done. In the U.S., Citi saw an 84% increase in daily mobile check deposits in May and a tenfold surge in activity on Apple Pay as quarantined customers used digital and contact-less tools to handle their financial activities. The lender’s Mexican operations saw an 80% increase in mobile app logins in March. Downloads of its mobile app surged 116% from February to April, while digital bill payments rose 78%.&nbsp;



“Banking has changed irrevocably as a result of the pandemic. The pivot to digital has been supercharged,” says Jane Fraser, president of Citigroup and CEO of its gigantic consumer bank. “We believe we have the model of the future – a light branch footprint, seamless digital capabilities and a network of partners that expand our reach to hundreds of millions of customers.”



Citi’s increasingly digital approach is visibly evident in Forbes’ second ranking of the World’s Best Banks, based largely on customer satisfaction surveys. Citi rates highly in six of the 23 countries where customers were surveyed (Citi has retail operations in 19 countries).



Forbes partnered with market research firm&nbsp;<a href="https://www.statista.com/" target="_blank" rel="noreferrer noopener">Statista</a>&nbsp;to measure the best banks in nearly two dozen countries. Statista surveyed more than 40,000 customers around the globe for their opinions on their current and former banking relationships. The banks were rated on overall recommendation and satisfaction, as well as five subdimensions (trust, terms and conditions, customer services, digital services and financial advice). Between 5 and 75 banks were identified as top banks in each country, based on the total evaluations collected, the number of banks in the specific country and the scores achieved.



The 2008 financial crisis didn’t just usher in an era of consolidation and low rates that reshaped the banking industry globally, it also coincided with the mass adoption of the smartphone and a shift to digital banking. In the wake, a crop of web-first lenders emerged to challenge the world’s biggest banks and made offering end-to-end mobile banking features a matter of survival. The coronavirus only affirmed that there’s no looking back.



Amsterdam-based ING, ranked highly in eight nations, leading banks worldwide on our list in its reach. The lender, which has a legacy that dates back to the mid-1800s, is a technological pioneer in the banking industry, creating digital bank ING Direct in 1997 at the dawn of the internet age. While ING operates hundreds of bank branches in the Netherlands and Poland, it is known as an entirely web-based bank in markets like Australia, Germany and Spain where it ranks in the top-five.&nbsp;



ING now handles some 4.5 billion digital contacts a year, according to Aris Bogdaneris, head of challengers and growth markets at ING, and it is embarking on an effort to make its digital services uniform worldwide. “We are inspired by the giant technology platforms and their customer engagement,” says Bogdaneris, who points out that user experiences for technology platforms like Uber are the same, regardless of where a customer is located. “We started measuring ourselves more against these platforms than against traditional banks,” he adds.



Now, with Covid-19 affirming most digital banking trends, Bogdaneris wonders whether ING will go all-digital. Says Bogdaneris, “Where we have physical distribution and literally closed branches, [the question is] do we reopen them again? Do we actually need them?”



The other banks that rated highly in more than five regions include HSBC and Santander at six apiece, and digital bank N26, which rated first in Austria and Italy second in Spain and France, and #29 in Germany. Founded in 2013, N26 stands out because it has no physical branches but offers free ATM withdrawals worldwide and recently raised $270 million as part of a Series D round that valued the firm at $3.5 billion.&nbsp;



Digital upstart Nubank is the top-rated bank in Brazil, beating out an oligopoly of legacy banks on our list. “The penetration of the internet and the penetration of smartphones created a window of opportunity for us,” says founder and CEO David Velez. “Even as a startup we could compete head-to-head with the big banks. Suddenly, you didn&#8217;t need billions of dollars to build bank branches and you didn&#8217;t need hundreds of millions of dollars to buy mainframes from IBM. You could use the internet to acquire customers,” adds Velez, “It enables a model that has fundamentally lower costs and a better user experience.”



Growth at Nubank, which operates throughout South America, has been staggering. In 2019, the lender saw its customers surge from 6 million to 20 million and its private valuation now stands at $10 billion.



If there’s any doubt that digital-first banks are the way forward, Velez offers a surprising statistic: Since the pandemic began, Nubank has seen a surge in customers aged sixty and over, the types of clients many bankers once believed would never leave traditional branch networks. Over the past 30-days, for instance, some 300 clients above the age of 90 have become Nubank customers.



Digital banks rated well in the United States as well. Online-only Discover and Capital One ranked #23 and #30, while neobank Chime ranked #36. All three beat out mega-lenders JPMorgan Chase, #36 and Citigroup #71. The other big four lenders, Bank of America and Wells Fargo, didn’t make the top-75.



USAA was the highest-rated bank in the U.S. The bank is open to members of the U.S. military and their families and has more than 13 million members.



&#8211;<a href="https://www.forbes.com/sites/antoinegara/">Antoine Gara</a>, Forbes Staff, <a href="https://www.forbes.com/banking-insurance">Banking &amp; Insurance</a>

Lifestyle late night working Barcelona.

The World’s Best Banks: The Future Of Banking Is Digital After Coronavirus

Nationwide protests following the death of George Floyd have thrown issues of economic inequality, already exasperated by the coronavirus crisis, into sharp relief. The wealth gap in America has been growing since at least the 1970s as income levels stagnated for lower and middle class households while continuing to grow for households at the top of the spectrum.&nbsp;



Centuries of racism and discrimination mean that this divide is a great deal wider for black households that are denied the access to the opportunities and resources available to white households. “No progress has been made in reducing income and wealth inequalities between black and white households over the past 70 years,”&nbsp;<a href="https://www.minneapolisfed.org/research/institute-working-papers/income-and-wealth-inequality-in-america-1949-2016" target="_blank" rel="noreferrer noopener">according</a>&nbsp;to economists Moritz Kuhn, Moritz Schularick and Ulrike I. Steins who published a 2018 paper on U.S. incomes and wealth since 1949. The Brookings Institution&nbsp;<a href="https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/" target="_blank" rel="noreferrer noopener">points out</a>&nbsp;that the ratio of white family wealth to black family wealth is higher today that it was at the beginning of the century.&nbsp;



Here are 9 numbers that sum up the vast gap.



<h3 class="wp-block-heading">16.8%</h3>



That’s the May 2020 jobless rate for black workers. During the same month, white workers were unemployed at a rate of 12.4%.&nbsp;<a href="https://www.nytimes.com/2020/06/01/business/economy/black-workers-inequality-economic-risks.html" target="_blank" rel="noreferrer noopener">Less than half of black adults</a>&nbsp;currently have a job, compared with just under 60% prior to the beginning of the pandemic layoffs in February. The sobering statistic comes after unemployment rates for black workers reached a record low in the months before the pandemic.



<h3 class="wp-block-heading">$17,150</h3>



That was the median net worth of black households in 2016, according to the Federal Reserve’s Survey of Consumer Finances, the <a rel="noreferrer noopener" href="https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/" target="_blank">Brookings Institution</a> notes. The median net worth of a white family at the same time was $171,000—nearly ten times as much.



<h3 class="wp-block-heading">8.7%</h3>



The Washington Post <a rel="noreferrer noopener" href="https://www.washingtonpost.com/business/2020/06/04/economic-divide-black-households/" target="_blank">points out</a> that in 1968, the median black household had just 9.4% of the wealth of the median white household, according to Fed data. Yet by 2016, that ratio had fallen to just 8.7%. In other words, the wealth divide actually widened a bit over nearly a half century of what is commonly thought of as progress for African-Americans. 



<h3 class="wp-block-heading">44.3%</h3>



That’s how much the median net worth of black families fell between 2007 and 2013, reflecting lingering damage from the Great Recession. White families experienced a smaller, though still substantial, drop in median net worth of 26%.&nbsp;



<h3 class="wp-block-heading">40%</h3>



That’s how much less likely black families are to&nbsp;<a href="https://www.census.gov/housing/hvs/files/currenthvspress.pdf" target="_blank" rel="noreferrer noopener">own their homes</a>&nbsp;than white families, according to the Census Bureau.&nbsp;



<h3 class="wp-block-heading">28%</h3>



That’s the portion of black homeowners who didn’t pay or deferred their mortgage payment in May, during the depths of the covid-19 crisis, compared with just 9% for white homeowners, according to the Urban Institute’s&nbsp;<a href="https://www.urban.org/urban-wire/new-data-suggest-covid-19-widening-housing-disparities-race-and-income" target="_blank" rel="noreferrer noopener">analysis</a>&nbsp;of the Census Bureau’s Household Pulse Survey .&nbsp;



<h3 class="wp-block-heading">36%</h3>



That’s the percentage of black respondents who said they had money in the stock market, according to a&nbsp;<a href="https://news.gallup.com/poll/211052/stock-ownership-down-among-older-higher-income.aspx" target="_blank" rel="noreferrer noopener">2017 Gallup poll</a>. The rate was 60% for white respondents. Investing in the stock market is one of many ways families compound their wealth.&nbsp;



<h3 class="wp-block-heading">46%</h3>



According to a&nbsp;<a href="https://crr.bc.edu/working-papers/measuring-racial-ethnic-retirement-wealth-inequality/" target="_blank" rel="noreferrer noopener">study</a>&nbsp;from Boston College’s Center for Retirement research, the typical black household had just 46% of the retirement wealth of a typical white household in 2016. The study notes that the gap would be much larger if it weren’t for the value of Social Security benefits households have earned and are expected to receive.



<h3 class="wp-block-heading">2 out of 5</h3>



That’s the share of black small businesses that were forced to close down in April because of the pandemic, <a rel="noreferrer noopener" href="https://siepr.stanford.edu/sites/default/files/publications/20-022.pdf" target="_blank">according to</a> University of California, Santa Cruz economist Robert Fairlie. Among white businesses, just 1 out of 5 was forced to close.



&#8211;<a href="https://www.forbes.com/sites/sarahhansen/">Sarah Hansen</a>, Forbes Staff, <a href="https://www.forbes.com/markets">Markets</a>

Miniature people standing on a pile of coins. A concept of income disparity.

Here’s What The Racial Wealth Gap In America Looks Like Today

IMG_6914 copy copy

Covid-19: Beyond The Lockdown: What Big Business Is Doing Now

Coronavirus has affected everyone in the UK, but not everyone has been affected in the same way.



This is starkly apparent when it comes to money. Eight million people are on furlough, receiving 80% of their normal pay from the government’s job retention scheme, while thousands more have been made redundant.



Many self-employed individuals and business owners are likewise under extreme financial pressure because of the lockdown.



But for others, the coronavirus has been a very different experience. Millions have been able to work from home on full pay but with significantly reduced outgoings – no commuting, no expensive coffees or sandwich shop lunches, no dry cleaning bills.



With shopping and entertainment options severely curtailed, general spending has dropping dramatically. According to pollsters YouGov, 1 in 6 people have been able to add to their savings, while 1 in 10 have managed to pay of their debts.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="960" height="480" src="https://www.forbesafrica.com/wp-content/uploads/2020/05/960x0-1.jpg" alt="" class="wp-image-45517" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1.jpg 960w, https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1-300x150.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1-600x300.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1-768x384.jpg 768w" sizes="(max-width: 960px) 100vw, 960px" /><figcaption>44% of respondents feel less secure about their financial situation   YOUGOV</figcaption></figure>



Perhaps not surprisingly, white collar professionals have been better able to improve their finances. Those in manual occupations are more likely to have continued going into work rather than working from home and enjoying the associated cost savings.



Worryingly, YouGov found that 36% of Britons have dipped into their savings to meet their bills during the pandemic, with 44% feeling less financially secure as a result of the crisis.



Additionally, 16% have reported that their debts have gone up, while over a third (35%) have reported that their incomes have decreased.



Government intervention



The financial situation for many people would undoubtedly have been worse had it not been for swift intervention by the government on an unprecedented scale.



The job retention scheme, originally due to run until the end of July, has been extended until the end of October – although from August employers will be expected to contribute towards the cost.



Businesses are also able to access a range of loans underwritten in full or in part by the government, including the&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/04/how-to-contact-your-bank-for-bounce-back-loan-details/#11cce61b1f87">Bounce Back Loans Scheme</a>&nbsp;and the&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/19/government-increases-loans-limit-refunds-sick-pay-as-jobs-data-triggers-gloomy-forecasts/#734d76484e4e">Coronavirus Large Business Interruption Loan Scheme</a>, where the maximum loan size was increased from £50 million to £200 million earlier this week.



Additional funding has also been made available to large corporations by the Bank of England.



Other government measures include the&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/13/income-support-scheme-for-uk-self-employed-goes-live/#25de46e032b1">Self Employment Income Support Scheme</a>. However, at present, this only provides payments to cover the months of March, April and May, and there has been no suggestion that it will be extended in the same way as the job retention scheme.



Mortgage payments holiday



The government is planning to extend its&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/22/fca-proposes-to-extend-access-to-mortgage-payment-holidays/#299ed5084c47">mortgage payments holiday initiative,</a>&nbsp;whereby banks and building societies are instructed to allow borrowers to miss repayments on the understanding they will make up the accrued capital and interest debt over the rest of their loan.



The scheme was originally due to run until 20 June 2020, but under propoals expected to be rubber-stamped this week, those who have already taken payment holidays will be able to apply for an extension of up to three months, while those who have not yet applied will be able to do so until 31 October 2020.



UK Finance, which represents lenders, says 1.82 million mortgages were subject to a payments holiday as of 20 May – roughly 1 in 6 of all mortgages.



The three-month payment holiday for credit cards and other credit-based products is under active review – we may hear more on that from the Financial Conduct Authority in the coming days.



Impact on motoring



One area of the economy that has seen a huge contraction is motoring, from car sales to fuel consumption.



The number of new car registrations collapsed in April, the first full month of the lockdown, falling 97.3% year on year, from 161,064 in 2019 to 4,321 in 2020.



The restrictions imposed by the lockdown inevitably led to most people driving less or not at all, which had a knock-on effect on sales of petrol. The reduction in supermarket pump prices to below £1 a litre earlier in May was a clear indicator that supply was well ahead of demand.



Research from Lloyds Bank suggests fuel spending in April was down 58%, while day-to-day commuting expenditure was 86% lower.



Online car retailer CarWow reckons more than two fifths of Britons have spent less than £10 on petrol during the last month, with a third purchasing no petrol at all.



Vix Leyton at CarWow, said: “After more than two months in lockdown, the idea of a regular petrol station top-up no doubt seems like a distant memory to the millions of British motorists who’ve not needed fuel &#8211; or perhaps even driven &#8211;&nbsp;for weeks.”



With some of the lockdown restrictions beginning to easy, Leyton suggests now might be a time to fill up: “For those wanting to take advantage of low pump prices, now is arguably the time to do so &#8211; providing you can do so safely &#8211;&nbsp;before lockdown measures are eased even further and long queues begin forming.”



Bike use &#8211; and thefts &#8211; on the up



Another effect of the lockdown has been an rise in the number of people cycling for their permitted daily exercise, but a consequence of this has been an increase in the number of bicycles being stolen.



David Fowkes of insurer Admiral said: “Several cycle retailers have reported that they’ve sold out of many models. We’ve seen a 46% increase in the number of bicycle theft claims over the last seven weeks compared with the same period in 2019. That’s incredible when you consider that overall theft claims have fallen during the lockdown as people have stayed at home, deterring burglars.”



Admiral won plaudits in April when it became the first UK insurer to give&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/04/21/uk-car-insurer-admiral-announces-customers-refunds-and-support-for-key-workers/#d4367ac6af35">a cash rebate (£25)</a>&nbsp;to all its car insurance policyholders. Only LV has made a similar pro-active gesture, leading the Financial Conduct Authority to impose a&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/14/fca-unveils-measures-to-help-insurance-policyholders-hit-by-covid-19/#76d28bd731e3">package of measures</a>&nbsp;that require insurance companies to provide support to customers in financial distress as a result of the pandemic.



Energy bills



With more people working from home and staying at home in line with government stipulations, there has been an increase in domestic energy consumption, with comparison site Compare the Market suggesting annual bills could rise by £400.



However, global demand for energy has reduced sharply, with factories and offices mothballed and travel services limited.



Stephen Murray, energy spokesperson at MoneySuperMarket, says cheaper domestic energy deals are available as a result:&nbsp;“A cocktail of factors have come together to make this is a great time to switch supplier.&nbsp;



“There’s been a major drop in the wholesale element of domestic energy prices of nearly 40%- something partly explained by oversupply in the market due to declining business energy usage as a result of the coronavirus crisis.”



As economies gradually emerge from lockdown and energy demand increases, there is likely to be an impact on prices in the opposite direction.



Tips to keep your finances in shape



Here’s a to-do list for anyone wanting to save money and get their finances in the best possible shape:



<ul><li>Compare energy prices:&nbsp;use a comparison site to see if you can save money by switching. If you’ve never switched or haven’t switched for two or three years, there are likely to be cheap fixed rate deals available</li><li>Talk to your insurer about saving money:&nbsp;the regulator has told car and home insurance companies to help customer whose finances have been harmed by coronavirus, but it’s up to you to contact them to discuss the options, such as reducing the estimated annual mileage on your car insurance and getting a premium refund</li><li>Don’t automatically renew insurance:&nbsp;whenever a car or home insurance policy comes up for renewal, run a quote on a comparison site to see if there’s a better deal out there</li><li>Get the best broadband deal:&nbsp;check you’re on the best deal, especially if you’re working from home or using streaming services more than usual. You need the best combination of speed, capacity, reliability and price. See if your existing service provider can improve its offer</li><li>Talk to your lender:&nbsp;if you have debt, such as a mortgage, personal loan, credit card balance or car finance, and you are struggling to meet your repayments, talk to your lender to see what options are open to you. Don’t be tempted simply to stop making payments as this will have a long-term effect on your financial record.</li></ul>



If you are in financial distress as a result of the pandemic, or it has made your situation worse, contact a debt charity such as <a rel="noreferrer noopener" href="https://www.nationaldebtline.org/" target="_blank">National Debtline</a> or <a rel="noreferrer noopener" href="https://www.stepchange.org/" target="_blank">Stepchange</a> for advice and support.



&#8211;<a href="https://www.forbes.com/sites/kevinpratt/">Kevin Pratt</a>, Forbes Staff, <a href="https://www.forbes.com/sites/advisoruk/">Advisor UK</a>



Contributor Group, <a href="https://www.forbes.com/personal-finance">Personal Finance</a>

Piggy bank, laptop, purse with money, coffee cup on wooden table top.

Finances And Coronavirus: Threats And Opportunities In Lockdown Era

Abidjan, Côte d&#8217;Ivoire, 8 April 2020 –&nbsp;The African Development Bank Group on Wednesday announced the creation of the COVID-19 Response Facility to assist regional member countries in fighting the pandemic.



The Facility is the latest measure taken by the Bank to respond to the pandemic and will be the institution&#8217;s primary channel for its efforts to address the crisis. It provides up to $10 billion to governments and the private sector.



Akinwumi Adesina, President of the African Development Bank Group, said the package took into account the fiscal challenges that many African countries are facing.



&#8220;Africa is facing enormous fiscal challenges to respond to the coronavirus pandemic effectively. The African Development Bank Group is deploying its full weight of emergency response support to assist Africa at this critical time. We must protect lives. This Facility will help African countries to fast-track their efforts to contain the rapid spread of COVID-19,&#8221; Adesina said, commending the Board of Directors for its unwavering support.



The Facility entails $5.5 billion for sovereign operations in African Development Bank countries, and $3.1 billion for sovereign and regional operations for countries under the African Development Fund, the Bank Group&#8217;s concessional arm that caters to fragile countries. An additional $1.35 billion will be devoted to private sector operations.



Commenting on the Facility, Acting Senior Vice-President Swazi Tshabalala said: &#8220;The setting up of the Facility required a collective effort and courage by all our staff, Board of Directors and our shareholders.&#8221;



Two weeks ago, the Bank launched a record-breaking $3 billion Fight COVID-19 Social Bond, the world&#8217;s largest US dollar-denominated social bond ever on the international capital market. Last week, the Board of Directors also approved a $2 million grant for the World Health Organization for its efforts on the continent.&nbsp;



&#8220;These are extraordinary times, and we must take bold and decisive actions to save and protect millions of lives in Africa. We are in a race to save lives. No country will be left behind,&#8221; Adesina said.



Press Release provided by the AfDB Group.

Category: Finance