The world of fintech is an exciting space to invest in and promises to produce an abundance of new and exciting opportunities for long-term investors in the years ahead.
In this segment of Backstage Pass, recorded on Jan. 11, Fool contributors Jose Najarro, Rachel Warren, and Demitri Kalogeropoulos, along with Fool analyst Asit Sharma, discuss a London-based fintech company called Twig that is built on the blockchain and allows users to trade their used goods for instant cash.
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Jose Najarro: I mean, to me, one of my favorite things about it as just a long-term thought. Obviously it's still very early stages to really see anything, but having that long-term thought where eventually, hey, maybe you can even trade your digital assets for some form of physical goods. I think that's a pretty cool concept that I think in the next few years can come to fruition.
Rachel Warren: Oh, totally.
Demitri Kalogeropoulos: Yeah, that's a really cool. Thanks for bringing this article. First, I was thinking, I know it's just like a digital pawnshop. But then [LAUGHTER] more I heard about it's like nothing like that at all. Today I was reading about another similar company that's called The RealReal, which does something, I guess similar except that it works with luxury products on the way, on the high-end of the market.
Stuff that has to be actually valued by an actual professional. How they use AI to do that, you snap pictures of this priceless object you have or whatever, not priceless. Then they can use AI to value it, and do it that way and convert it and sell it for you and do things like that. I think that there's some power in that approach.
I also want to highlight, I think the article said it's showing how the demographics of this is trending really young. I think it said that their typical person is around 22 years old. Getting people on that approach, I think is cool.
Rachel Warren: Yeah. The one thing I thought was really interesting that they noted in the article was this idea of being able to reduce one's carbon footprint, which is really big focus and part of this company's mission statement as we saw earlier.
But then you think about, OK, but the money you make from here, where is it going? Is it going to buying more physical goods?
Even if it's going to buy things like, digital currency, NFTs, crypto, there are energy costs associated with that because of how much energy mining requires. I thought that was a really interesting point that this one made, but I like the idea. I'm curious to see where it goes.
Asit Sharma: It's so funny. Years ago, Netflix started mining the data that they had to shape their content. They figured out if, Jose likes this certain type of crime mystery, and he also likes this actor who is actually a comedy actor, and lots of people have his taste.
They could entice the comedy actor to come do like a mystery thriller, and many people would watch different configurations like this. It seems as if someone sat down at their table and said, OK, if I could catch the interest of millennials like, positively learning way what would I do? [LAUGHTER] You'd take the circular green economy.
You'd marry it to NFTs and digital assets, you throw in the term bank lease, and you'd have an audience. I may think it's fascinating. Many questions arise if they do get to this offering where you are exchanging your goods for digital assets.
Then they must be doing some arbitrage because they have to have the inventory of the digital assets. As those values are changing, it's just like trying to use Bitcoin as a store of value.
Many people make that argument, but right now it's such a volatile asset. Perhaps it's some stablecoin that you get than you can convert that into your currency of choice.
Otherwise, it would be hard to keep everything in line just based on how often these digital assets change. The other thing that is really interesting is this idea that they are only playing in the supply side of the market and that's a good thing. Everything I've been reading is, at least for the near-term, showing that the supply side is over-burdened.
There's too much inventory out there, and that's what's crimping the efforts of some of these big resale entities to function profitably in the market. Not they're functioning unprofitably, but there's a lot of supply now. That itself is fascinating.
But yeah, I like the way that they've design this, the nod to the B Corp, which is very important. If they come out into the U.S., you'll probably see if they will go public in their prospectus, we've also decided to become a public benefit corporation, which is something that you can layer on with your B Corp status, which is supposed to be very mission-friendly.
You're sending a message to investors that finances are important, but we also are making decisions according to some sustainable bottom-line principles. Really, really interesting the fact that they don't have a banking license means that they are almost doing what every other payments company is doing.
If you think about PayPal or Wise, part of the natural progression of getting someone into your ecosystem is giving him that debit card and then finding shops where you can get a discount.
I think Venmo does this, Wise does this, PayPal does this. They are also just getting into a business which is really well-trodden over at the moment, the idea of the almost like a prepaid debit card or debit card linked to the value you're holding in your account.
Anyway, how interesting [LAUGHTER] is this for mind-boggling?
Rachel Warren: Yes, it's cool. They did say that, I guess, that you wouldn't know this to look at it. I certainly wouldn't, but I only saw because of the article that business has been built on blockchain from the beginning.
So this next step where they're going to be launching what they call a first of its kind, Web 3.0 green payment infrastructure, will bring this connection between being able to monetize digital and physical goods. So cool.
Asit Sharma: I know we need to move on. Last question, Rachel, when you're reading through it did it discuss how you get the goods to them? For example, certain resale companies like Poshmark, you send the goods to them, but they pay those costs. [OVERLAPPING] Did they mention that?
Rachel Warren: Yeah.
Asit Sharma: It's free.
Rachel Warren: It's free for the user to send it, so there's no like none of the risks you would normally have, like if you had to do it yourself. I would presume some of those fees you might not retain some of that like if your item it was saying doesn't pass.
Maybe they get it and they are like, oh, actually we don't want to sell this. But it seems that overall it's a very simple process if you list, you get paid and then you send that to them.
Asit Sharma: Cool. Awesome. We will have to return to this company at some point.