The Pay Week: Bitcoin, Unbundling

When Elon Musk speaks, bitcoiners listen. The price of the world’s most famous cryptocurrency has risen steadily over the past two weeks since Musk added #bitcoin to his Twitter profile and declared himself a “Bitcoin supporter” on Clubhouse’s social media – up to a new high of 45,000 USD pro led Bitcoin after Tesla announced it would sell $ 1.5 billion in Bitcoin

“I think part of the excitement about Bitcoin is because it’s an exhilarating ride – it goes up and down. Roller coasters are fun, aren’t they? People like to drive it, ”said Amias Gerety, partner at QED Investments, to Karen Webster when he stopped by for the latest issue of The Week In Payments.

Bitcoin may be an eternally wild ride, but not the only one up for discussion this week, with the fate of physical commerce, the future of ghost kitchens, and the innovative potential of payments full of data were also on the agenda.

Bitcoin Mania strikes again

There’s a serious part and a dumb part of Tesla’s big Bitcoin purchase, Gerety said. The serious part is the inescapable reality that Bitcoin is becoming more mainstream and therefore a more serious thing for investors across the board. QED, he said, has long been reluctant to throw money into the crypto segment, but even it has recently made its first investment in a crypto firm in Mexico.

And there are environments, especially places like LatAm, where the value proposition for Bitcoin is much more evident due to political instability and currency hyperinflation. There it makes sense to look for a certain Bitcoin exposure as a hedge against uncertainty.

In the context of converting a balance sheet investment of $ 1.5 billion into Bitcoin, however, this was more clearly due to the less serious side of the ledger. Traditionally, CFOs thought the balance sheet was a place where low risk investments could be made for cash flow needs. Inasmuch as they are looking for a return, the tendency is to do it in a mission-oriented manner with corporate venture capital, he said. What Tesla is doing, he said, is not using Bitcoin as a currency or even remotely doing typical behavior – it treats Bitcoin as a “speculative asset”. And one, he said, that aligns incredibly poorly with the company’s mission to remove CO2 from the atmosphere.

“One and a half billion dollars in Bitcoin will probably use about half a terawatt of energy,” said Gerety. “That’s almost 10 percent of the electricity savings that all North American Teslas will produce in the next year.”

And broadly speaking, as much as every wild ride is, Webster and Gerety agreed that hopefully retail investors know the thing about roller coasters is that they almost always end up where they started.

The future of the physical world

Consumers have digitized their habits in the last year, mostly forced by circumstances. But consumers have also learned to love their new digital habits and find them more efficient, easier and more convenient than what the old normal had to offer. But the physical world and the physical consumer experience, said Geret, are not going away.

There will always be certain goods and products that the customer would like to see in person beforehand. Even prototypical online brands like Rent the Runway have opened physical stores, he said, because consumers still want customization as part of the high-end fashion shopping experience. No matter how good the virtual experience gets, there will always be something that it cannot replace. According to Gerety, this is no longer an either-or question.

“At some point your strategy focuses on technology for efficiency, technology, for immediacy, and then customer acquisition costs,” said Gerety. “You just analyze how best to win customers, how to best satisfy customers. Sometimes it’s physical and sometimes it’s digital. “

In many ways, what happens in retail is similar to what happens in banking as consumers find it easier to trade digitally. In both places, he said, the new challenge is building the personal experience around what they just can’t get online. And there won’t be a single correct answer here. What works for Home Depot and Lowe’s may not work for the neighborhood hardware store, and vice versa. The trick is to build a powerful and efficient backend so that the frontend experience can be customized and curated based on the needs of the actual consumer.

“I think it’s actually pretty exciting because what we’re saying is whatever you thought before, reconsider it. And when that happens, there’s plenty of room for creativity – it’s not just about stamping out a number of Apple Stores for other categories of consumers. “

The unbundled path to innovation

Ghost kitchens, though rarely so called, are a prime example of the power inherent in unbundling. It’s about unbundling marketing and branding from delivery and cooking. It’s a step not dissimilar to what happens to the branded frozen products in a supermarket freezer shelf. You can think of a ghost kitchen as a modern, mobile version of the same idea in many ways.

“This opens up opportunities for payment providers – we’ve seen companies like Toast and Square now developing tools to compete with what are known as practice management software companies,” said Gerety. “At the same time, software companies are integrating payments into practice management in order to compete with Toast and Square. I find that exciting. I think it shows that you know that when you unbundle you can start to rethink things. “

Gerety said he doesn’t have a crystal ball and can’t see the future of payments, retail, or grocery delivery any better than anyone. However, he knows that innovators get more creative and the experience offered to consumers becomes more unique across the board as things are unbundled.



Above: It’s almost time for the Christmas shopping season, and nearly 90% of US consumers plan to do at least some of their purchases online – 13% more than in 2020. PYMNTS surveyed more than 3,600 consumers as part of the Holiday Shopping Outlook 2021. what drives online sales this Christmas season and what impact product availability and personalized rewards have on retailer preferences.

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