Walmart Makes Cash Cheap, Banks Balk At Bitcoin And Startups Struggle To Profit

Data Dive: Intuit, Zillow And Amazon

Last week, earnings managed to steal the front and center show. Amazon, Google, Microsoft, PayPal, Starbucks and MoneyGram all dropped their latest round of performance data on the markets — and investors and analysts were exuberant and/or terrified, depending on how closely those results conformed to what they thought was going to happen.

But off the trading floors, the news cycle carried its own pace as Walmart made cash cheaper to send, bitcoin and the blockchain got a series of thumbs down from bankers around the world and startups started feeling the burn.

Ready for the latest?

Walmart2Walmart Lowers Fees – Gets More Digital

There are many ways to celebrate a third anniversary — Walmart, being Walmart, decided lowering prices is a good way to go.

Starting last week, fees for sending money over the Walmart2Walmart network have decreased. Now a money transfer of under $50 will cost $4, a transfer between $50 and $1,000 will cost $8, and transfers between $1,000 and $2,500 will cost $16.

That saves consumers anywhere from 20 to 90 percent, depending on where the consumer is wiring funds from in the United States. Kirsty Ward, vice president, Walmart Services, notes that most of its rivals peg prices to where consumers are, meaning that someone in New York sending $1,000 with one of Walmart’s key competitors will pay a lot more than someone sending that same amount of money from Peoria. With Walmart, both customers will pay the same — and still be paying less than they would be paying with anyone else.

“We don’t see why it should be different whether you are sending money from San Francisco or New York or Northwest Arkansas. Location doesn’t change the process, so customers shouldn’t be charged differently,” Ward told Karen Webster in an interview.

Walmart2Walmart has also made a digital upgrade with a bit of help from American Express.

Customers using the American Express’ Bluebird prepaid checking alternative starting next month (May) will also be able to use the Bluebird app to send money digitally for a cash pickup at Walmart store locations — under the same free structure.

The receiver picking up the funds doesn’t need to have a Bluebird account.

“This is about trying to eliminate those paper forms and 20-foot-long paper receipts,” Ward noted. “That’s why we have partnered with Amex and we’ve incorporated money transfers into the Bluebird account.”

The Walmart2Walmart network allows users to send and receive cash at 4,000 stores in the U.S.

The Bank/Blockchain Break-Ups

It’s been a rough week for the relationship between banks, bitcoin and the blockchain.

Three major blockchain exchanges — Bitfinex, OKCoin and BTC-e — have all separately reported that they’ve been unable to process transactions in dollars as global banks are pulling out of high risk areas.

The issue comes when exchange users wish to change bitcoin into regular currency, at which point the exchanges leverage relationships with local banks that themselves rely on larger “correspondent banks” to facilitate wire transfers and process transactions that involve foreign currencies.

As bitcoin has had several high profile brushes with infamy, global banks have gotten increasingly nervous about even indirect interactions with bitcoin exchanges — particularly in cases where they could be held liable if something goes wrong.

JP Morgan Chase & Co. prohibits banks it transacts with from dealing with virtual-currency exchanges, for example. According to Bitfinex, it is unable to process transactions for users because Wells Fargo has instructed their partner banks in Taiwan not to deal with virtual currency exchanges.

And bitcoin will likely see more regulatory action here in the U.S. — the Securities and Exchange Commission last month rejected two separate proposals for bitcoin-based exchange-traded funds. There is still one more left to go — but most industry watchers don’t think the odds are good. China’s central bank is also considering further limits on bitcoin exchanges — specifically that exchanges need to be able to verify a client’s identity and adhere to banking regulations. It is considered unlikely that the increased regulatory scrutiny will warm banks’ enthusiasm for bitcoin.

And then there is the blockchain technology that underlies bitcoin — which banks also seem to be cooling on some.

JPMC announced this week that it is pulling out of its backing of R3 — a big blockchain consortia that exists to help large financial sector firms develop shared blockchain technology to run some of their most cumbersome and expensive processes.

The firm had initially planned to raise $200 million from members and give them a 90 percent stake in a new company. That plan was changed in November — it lowered the target and said members would get a 60 percent stake in R3 on $150 million raised.

JP Morgan Chase & Co. is the latest bank to pull out of R3. Goldman Sachs Group Inc, Banco Santander, Morgan Stanley and National Australian Bank left the group in quick succession late last year as R3 began to move forward with its fundraising move.

R3 is currently looking for $150 million from its members and strategic investors in return for a 60 percent stake in the firm. R3 currently has about 80 financial institutions as its membership base.

JPMC is said to still be pursuing the blockchain in other venues. It is a member the newly formed blockchain consortium Enterprise Ethereum Alliance, and it is an investor in blockchain startups Axoni and Digital Asset Holdings. It is also a participant in the Hyperledger project.

Startups Struggle As Investors Eye Profit

R3, with its fundraising difficulties, can at least comfort itself with the knowledge that it is not alone. Lots of startups are having troubles these days — VCs and hedge funds are way less worried about missing out on the next big thing and more worried about investing in the next non-profitable neat idea.

Investment in U.S. tech startups plummeted by 30 percent in dollar terms in 2016, as opposed to the results in 2015. In 2014 and 2015, more than 5,000 U.S. tech startups collectively raised about $75 billion, according to Dow Jones VentureSource — but much of that funding went to about 294 tech startups that raised at least $50 million apiece. Almost three quarters of those companies — 216 — have neither raised money nor been acquired since the end of 2015.

Startups tend to raise funding every 12 to 18 months.

It’s not that no one is getting funding — it’s just that everyone is no longer getting funding.

“There are companies that everybody wants to invest in, and there are a large set of companies that almost nobody wants to invest in,” said venture capitalist Keith Rabois of Khosla Ventures.

But for firms that once looked like strong bets only to lose their investors’ confidence, the story is quite different. Investors are not interested in funding turn-around, growth or pivots — which means entrepreneurs are spending through that cash fast as they hope their moves to get big fast will translate into getting profitable now.

“They’re like the walking dead,” said David Cowan, a partner at Bessemer Venture Partners, who expects a steady stream of failures.

Quixey, Zenefits and Medium have all raised over $100 million — and have all closed their doors or drastically cut staff of late to deal with the great cash crunch.

“There’s going to be a shakeout” for companies that can’t show a profit, said James Beriker, the chief executive of meal-delivery service Munchery.

So what did we learn this week?

The world of 2017 is very different than the world of 2014. Money transfer is cheaper, banks are finally feeling wary about digital currency and making a profit is the world next, big thing. (We thought it always was.)

Welcome to the future.