US BANK ACCOUNTS, CREDIT AND DEBIT CARDS and more!
Happy Friday everyone! Anything happened? Anyone heard anything?
So Best Friends Finance has just dropped as the parent company of the ‘new RPay’, with a new app in development. I’m going to focus on this for this update as it’s a pretty big announcement.
- Memory Lane
- BFF
- TVL
- AOB
Memory Lane
Two years ago we had Eric M. Jackson of this parish tweeting
And 1 year ago…
We all know how long the next bit took.
BFF
Yes, Best Friend Finance now exists! I think Gabo was the first to announce
So what is this? Briefly (I’ll go into more detail later) it’s a full US bank account through an app which allows you to send international transfers at super low fees. Linked to this is a standard debit card and an international credit card.
Wow — that’s a big deal. Only a few months ago we were wringing our hands having lost a banking partnership which effectively put RPay out of fiat action (you could still send USDT and other crypto to the wallet).
Bit more detail from Nevin as well
Reserve Blog :
There’s a website of course
I helped out Fiscus Digital for a podcast with Gabo where we talked a fair bit about this :
You need something Apple to listen for the time being.
Nevin also did an AMA on Discord where he explained BFF as well — which wasn’t recorded — so I guess you had to be there! Braden did a good summary though :
Ok, so let’s dig in — I’ll add a bit more detail from Gabo where I can we’ll break it down from the open announcement in parts :
Our Mission: Financial Inclusion for All
At Best Friend Finance, we’re just trying to make sure everyone can get equal access to the six essential financial functions. These are the pillars that can foster economic empowerment and growth:
Earning Money
Saving Money
Moving Money
Insurance
Lending/Borrowing Money
Investing/Raising Money
If we can help bridge the gap between those who have privileged access to these functions and those who barely have it at all, we would be modestly but literally reducing the gap of inequality. We firmly believe that equal access to these functions can profoundly change the trajectory of a human being. That a big chunk of human dignity begins when these functions are easily and equally accessible to all. That humankind is in debt to itself until these goals are met. And that the global economy is bound to thrive once we do accomplish these six deceivingly simple goals.
The Insurance, lending and investing/raising parts remain a mystery but must be part of a future offering in the App — maybe traditional banking, maybe with a flavour of DeFi — not sure yet. The earning saving and moving — sound familiar? Well RTokens are coming in somewhere.. let’s keep reading.
The Initial Product: Ambition and Focus
Our first product is ambitious, but we’re approaching it step by step. We are building a new app from scratch that is designed to make moving money across borders more efficient, specifically between the US and LATAM. With the US as a global financial hub and with LATAM’s extensive connections, we’re creating a pathway for global adoption and inclusion. But to achieve success, we must start focusing on providing more efficient and inclusive banking and cross-border money movement in the US. It’s an exciting journey, and we’re committed to excellence every step of the way. This new app, which we will be announcing in the coming months has these initial characteristics:
US Banking: Through a Bank Sponsorship, the new app will offer a full US bank account to people within the United States. This matches the functionality of other fintechs in the US and, when combined with our other functionalities, streamlines small cross-border transactions. According to a study by Swift, 81% of consumers explore their bank’s offerings first when considering cross-border payments. (The low-value cross-border payments market opportunity is estimated at $10 trillion.) The current experience in this realm is fragmented and expensive. Our goal is to become the primary solution for US customers. If we succeed in this strategy, we have a pathway to achieve global adoption, especially considering the US’s role as a global financial hub.
Digital Dollar Custody: We back the international users’ balances within the app by having custody of stablecoins. We’ve chosen an RToken, specifically eUSD, for this purpose due to the added layer of overcollateralization it offers to preserve its value. You can delve into my thoughts on eUSD in a previous post. This method allows us to provide dollar balances to non-US customers and streamlines transactions between users in our ecosystem. These transactions occur within our ledger and custody, regardless of user location. Although US customers won’t have stablecoin backing their balance — as they will possess a US bank account within our app — we’ve established a digital bridge. This bridge facilitates seamless interactions between US domestic and international customers within the same platform, enhancing transaction efficiency for the end-users.
So the App (we don’t know it’s name yet but it won’t be called BFF (phew)) is going to be targeted at US residents who are in the LATAM community — the marketing will be slightly edgy — apparently a bit like Liquid Death if you’ve ever heard of that (I haven’t because I’m a Gen X). This is a full on US bank account, available because Reserve found a bank sponsor which allows them to offer all US banking services to App users.
Targeting US users gets the people who send money back to LATAM — let’s remind ourselves of the volumes here :
So a huge market. Apparently approximately 46M displaced Latin Americans live in the US. Mexico is by far the largest — we know an entity in Mexico don’t we? Let’s read on:
Latino Population: The Latino population in the US experiences low banking penetration, with approximately 65% being fully banked. This limits their capabilities within the financial system. Concurrently, they are more likely to send remittances back home, as evidenced by 27% of foreign-born households reporting monetary transfers, compared to just 1% of native households. We believe that offering banking services tailored for this demographic, in their preferred language, combined with the efficiency of cross-border transactions, can make a positive impact on their lives. This approach also paves the way for broader adoption across the continent, making them our initial focus.
Card: Both US and international customers will have the ability to utilize a card to spend their balances. Due to the distinct mechanisms in place for US and international customers, different card programs will operate behind the scenes. However, from a user’s perspective, the experience remains largely uniform. Another vital aspect is our commitment to enhancing the experience for international customers, positioning the card as the primary means of accessing funds. More details will be provided closer to the launch.
Reward System: We’ve developed a unique approach to reward card usage, positioning it as the most lucrative method to transfer money. While the model promotes distribution both domestically and internationally, it’s particularly optimized for our enhanced cross-border transaction system. Our aspiration is for our reward system to provide benefits that surpass the amounts spent on remittances.
So all US accounts will hold dollars — as normal for all US citizens — no attempt to go crypto here. However — if App users want to send money cross border, then Reserve will be the intermediary. Let’s take an example US → Mexico pesos transaction for $300 (which is about the average remittance). (I reserve the right to be slightly wrong here)
US dollars get sent from the US bank to Reserves hard landing legal entity in Mexico, which seamlessly converts the USD into eUSD and loads the recipients ‘dollar’ balance. This is where RTokens are minted off chain and are custodied by Reserve. Because Reserve is now linked to the Mexican banking network direct, the cash out rates are competitive. This was a common cause of complaint when using intermediaries.
The person in Mexico can then cash out to pesos to their bank account (RToken gets burned) or keep the balance and use the international card to spend eUSD direct in pesos or any other currency — VISA/Mastercard do all the conversion here but Reserve send them USD again — but it’s seamless.
This all sounds pretty amazing right? So what’s the USP?
Let’s have a look at Wise remittance fees
Using 16.7782 as the exchange rate — a quick look and the banking rate is 16.87, so there’s something coming off the top as well.
Reserve plan to be more efficient in converting that rate — they have less admin using stablecoins than a traditional money service like Wise and also they’ve negotiated a really good rate with the credit card company, so they can offer cashback incentives to the sender. Gabo thinks this will result in the cheapest remittance rates on the market (direct from your bank remember) and potentially even make it PAY YOU MONEY to send money by giving you points on your card.
This is the USP — cheapest remittances from the US — they’re focussed on Mexico because of the banking links but hope to do the same in other LATAM countries.
Once this is up and running well, Gabo thinks this model can them be pushed out reasonably efficiently to Africa, Europe and Asia.
I should also mention that getting some other apps requires a social security number (cashapp for example) and Reserve will not require this — their proof of identity will be a little easier but still comply completely with the bank and KYC for international transfers.
One thing the Venezuelans were asking for A LOT was a card attached to the App — because then you can sign up for Netflix and buy anything you want online — plus just swipe the card in a supermarket. I think the possibilities here have just done a 100x to the original App.
The option is also there to add other RTokens — hyUSD are you watching? If they are deemed safe enough. An interest-bearing RToken will lock in TVL.
So — all good — great in fact. So wen? WEN WEN WEN?
Some months is all they are saying — wisely I would say — because we all know what happens when you say mainnet in 2021.
Considering the original App took a long time to get even 5000 users, I think launch is not going to be notable. Gabo states that they are going to have to find out what people like and don’t like and iterate the engineering a lot in the first few months before they can scale significantly.
I’m going to stick my neck out and say launch will be this year — I’ll go December sometime. But 10,000th user won’t be until April is my other guess. Thereafter, however, the whole App is MUCH less in need of support due to the simple banking interface, so thousands a week could easily be onboarded. We were all waiting for the first millionth user — will 2024 be that year?
The knock on effect of this is the rise of eUSD — more RTokens means more revenue for auctions and more revenue for RSR stakers on eUSD. Venezuela didn’t have that big a float of eUSD — mostly in and straight out again, but 2 things are different :
Mexico remit 10x to Venezuelans and there’s a reason to keep a balance in the App — the card. You can spend directly from your eUSD balance in local shops / the internet.
I think this in time will add tens, potentially hundreds of millions of eUSD. And this all leads to one of my MCap tables — lets imagine eUSD has an MCap of $300M — about 10x what it is today.
That would lock up 22.5Bn RSR at todays prices. More interestingly it would yield over £20k per day in revenue. Interesting times.
TVL
Yields are looking good — few frightened holders left as Compound got hacked — another one!
AOB
Another great thread
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Moby are now tweeting quite a lot and getting some traction — eUSD in there as well!
And what’s this? ANOTHER PODCAST
Yes — Gabo will be talking some more about BFF! Join us then!
Thanks for reading!
