#278: Apple and Goldman Sachs Plan Buy Now Pay Later (BNPL) Service, & More

According to recent reports, Apple and Goldman Sachs are planning a Buy Now Pay Later (BNPL) service that would allow users to split Apple Pay payments into installments with loans funded by Goldman Sachs. Like BNPL providers Affirm and Klarna, Apple would offer short-term interest-free installment plans and longer-term interest-bearing plans for higher ticket items. Importantly, the service will be available to users with any credit card – not just the Apple Credit Card – linked to the Apple Pay wallet.

In the US, the BNPL space could be evolving much like it did in Latin America: installment payments could become consumer payment preferences not controlled by specific BNPL providers but by acquirers or digital wallets such as Apple Pay. In Latin America, installments are offered by acquirers or payment facilitators like EBANX to merchants and thereby are part of most consumer card payment flows. Using this model, Visa and acquirer Global Payments already are offering installment payments in Canada, but it would require a significant lift to roll out this model across North America and Europe. As other BNPL providers, likely including digital wallets like Square’s Cash App and PayPal’s Venmo, enter the space, early providers might be unlikely to benefit from user loyalty and could see their value proposition decline.

This week Netflix, the world’s largest video streaming service, hired EA and Facebook veteran Mike Verdu to lead a new video gaming effort. As Vice President of Game Development, Mike will add video games to the Netflix platform within a year. While we can only speculate about its potential success; we can understand why Netflix is adding video games to its platform.

Like all video entertainment platforms, Netflix competes for eyeballs. In recent years, more and more eyeballs have been turning to video games, thereby taking time from Netflix. Popular gaming platform Roblox, for example, enjoys play time of ~2.5 hours per day, roughly the same engagement as on Netflix and significantly more than that on most social media sites. In fact, Netflix has been calling out the video game industry as its leading competitor for years.

Its move into video gaming seems to be as much on the offensive as defensive. Compared to only 207 million users on Netflix, the number of video game players worldwide is roughly 3 billion people, approximately 40% of the global population. In 2020, global video games generated revenues of roughly $175 billion, more than the music, television, and film industries combined. Even a fraction of the video game market would be a meaningful increment to the streaming giant’s revenues. Now the question is whether Netflix will be able to execute in this highly competitive space.

A recent tweet by an Ethereum smart contract developer who shared code on GitHub has sparked controversy about reorganization attempts on the Ethereum blockchain. Technically feasible on all blockchains, a reorganization occurs when miners support an alternative transaction history. The chain with more proof of work behind it becomes the ‘longest chain’, invalidating transactions on the original chain. The risk is that miners could use this tactic to rearrange or censor prior transactions for financial gain.

The Bitcoin community has been vociferous in its opposition to reorganizations. In 2019, for example, Binance considered a Bitcoin reorg to undo a hack and recoup 7000 BTC stolen from its exchange. Responding to a severe Bitcoin community backlash, it abandoned the idea.

Bunny Girl, the Ethereum developer, seeks to use Ethereum’s smart contracting language to facilitate the coordination of reorganization events. With three simple steps, anyone could request the reorganization of a block, paying the miner who re-mines the block.

Bunny Girl is escalating an Ethereum debate on the negative externalities of miner extractable value (MEV), with some proclaiming it a negative-sum game. In response, Flashbots, a team of MEV experts, has laid out some solutions, outlining protocol-level, social, and technical obstacles to such an attack.

Based in China, fashion e-commerce retailer Shein is taking significant market share by slashing design-to-production times with the help of machine learning. According to various estimates, Shein accounts for 28% of US fast fashion sales, up from 14% last year and has overtaken fashion giants such as H&M, Zara, and Forever 21. At $10 billion in 2020, its global revenues have doubled every year for the past eight years. Based on its mobile-first philosophy, Shein consistently tops the charts in app store downloads, user engagement, and social media presence.

Shein’s ultra-fast fashion model scrapes internet data and uses artificial intelligence to predict fashion trends. With a vertically integrated supply chain, it compresses production times to as low as 3 days,  adjusts inventories based on user app behavior patterns, and adds thousands of low-priced items to its platform daily. With a creative marketing strategy, Shein incentivizes influencers and users to share content natively and on social media platforms like TikTok. That said, Shein does face ethical concerns associated with its highly automated prediction engine and the lack of visibility into its labor practices.

ARK believes that companies leveraging machine learning and other forms of automation like additive manufacturing will continue to streamline the design-to-production process. Shein’s AI-enabled supply chain and marketing strategies offer an exciting example of this progress.