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Home » Daily Briefing » Daily briefing - 30 April 2019

Daily briefing - 30 April 2019

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The Ledger Nano wallet

From the genius mind of Hyperion's David Birch comes an alternative take on Apple's move into cards, and which we suspect might be right. He thinks Apple Card is all a bit of misdirection, and tell us to watch Apple Cash, which is used for peer to peer payments. "Cognisant of how Starbucks makes out by persuading citizens to exchange their US dollars that are good anywhere into Starbucks Dollars that are not, and of Facebook's likely launch of some kind of Facebook Money, Apple are hoping to kick-start an Apple Cash ecosystem," he writes. "In this ecosystem Apple would carry the float, which might well run into millions of dollars (Starbucks' float is over a billion dollars), and if it could persuade consumers to fund app, music and movie purchases from Apple Cash instead of cards it would not only save money, but anchor an ecosystem that could become valuable to third-party providers as well. With Facebook's electronic money play on the horizon, I think Apple are making a play not for a new kind of card to compete with my Amex Platinum and my John Lewis MasterCard but for a new kind of money to compete with BezosBucks, ZuckDollas an Google Groats." (h/t to FK for the tip.)

Indeed, the trend towards secure elements on phones is a big part of the wallet ecosystem. What is a wallet in the context of a phone? Well, it's often a secure chip separate from the rest of the phone, and can't be easily accessed even by gaining control of the phone's operating system. You will have read here on occasion about efforts by HTC and Samsung to insert secure elements into their phones as cryptocurrency wallets. Samsung last week increased its investment in Ledger, the leading manufacturer of hardware devices for storing cryptocurrencies, paying $3 million for an additional stake. (Ledger makes a Bluetooth-enabled USB-stick sized device for storing digital assets offline.) Ledger, according to Coindesk, is working with Nomura in Japan on a custody venture and collaborating with Legacy Trust in Hong Kong on custody services for Ethereum-based tokens. Samsung and Google were early investors in Ledger, which is now valued at around $290 million. While Samsung's folding phones have grabbed the media attention, the company also announced recently a new lineup of Galaxy 10 phones that will include cryptocurrency wallet functionality. "And the company is now said to be working on its own unique blockchain based on Ethereum," says Coindesk. "Indeed, Samsung may one day issue its own token, according to Coindesk Korea."

For all the excitement around cryptocurrencies, institutional investors have largely steered clear, because of custody issues. Individuals might be happy with a recovery phrase written on the back of an envelope but that won't really fly for institutions. We've long suggested that banks are as good a place as any to keep your keys. As the story above shows, there are some serious players in the custody area, and most are traditional players that are now angling for digital asset custody: witness the scramble in Switzerland, which has re-purposed old vaults into new vaults. The Bakkt exchange is developing a partnership with BNY Mellon for private key storage. Bakkt has recently acquired the Digital Asset Custody Group and has applied to the New York Department of Financial Services Commission for permission to operate as a qualified custodian for digital assets.

Lafferty Group has been pointing to the convergence of credit cards and fintech players, and news out of India brings us fresh confirmation. The combination of smartphone and mobile wallet is proving a powerful force, so much so that new players are now drawing on the most sophisticated elements of traditional bank credit. "Ride hailing app Ola is set to launch a credit card, likely in partnership with State Bank of India (SBI), and begin pilots as early as next week," reports Economic Times of India, with a suggestion that Ola plans to issue one million credit cards in the first year of the programme, reaching to its 150 million strong customer base. "Ola is betting big on credit-based payment as next frontier of digital payments," one of the persons said. Sandeep Bakhshi, CEO of ICICI Bank, told analysts that the aim is to combine bank and merchant databases. "Credit card partnerships are a high-growth opportunity for banks as they get access to a large number of new customers at a relatively low cost, and merchants who don't know what customers are buying outside their stores. By combining both databases, both the merchant and the bank can get a much deeper understanding of the consumer."
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