WhatsApp has become the dominant messaging platform, dwarfing all other contenders with the exception of its Facebook stablemate Messenger. In doing so, this hyper-scale “over-the-top” platform has also pushed legacy SMS messaging into the background, which given its limitations is no bad thing. But now the latest move from Google’s Android is likely to be WhatsApp’s sternest challenge yet.
If you haven’t caught up with RCS yet, you soon will. Rich Communication Services is a reinvention of cellular messaging, a halfway house between the SMS ecosystem run by network operators and platforms like WhatsApp and iMessage. The wide-scale RCS rollout is being driven by Google as Android’s iMessage equivalent, but it has always had one critical flaw. Until now. Maybe.
WhatsApp popularized the shift from network-based SMS to a separate messaging platform. The cross-platform app enabled users to exchange richer data, to send messages over WiFi at a time when many users still paid for each SMS sent. This was followed by groups, voice and video calls, and its now trademark end-to-end encryption. Messaging had been reinvented.
A couple of years after WhatsApp, Apple jumped into the game with iMessage—its obvious drawback, that senders and recipients had to be using iPhones, was overcome by integration with the standard SMS platform on those phones. If a recipient was not on iMessage or was offline, the message would revert to SMS.
The thinking behind RCS was to deliver a best of both worlds solution—the cross-platform ubiquity of SMS with the functionality of WhatsApp and iMessage, but built right into the core network infrastructure. And for the networks, who have lost billions in revenue to the dominant over-the-top platforms, this was an opportunity to try and pull some of this back.
The issue, though—and it’s a big one, is that the SMS infrastructure is inherently insecure, lending itself to so-called “man-in-the-middle attacks.” Messages run through network data centres, everything can be seen—security is basic at best, and you are vulnerable to local carrier interception when travelling.
I can’t stress enough how insecure SMS messaging is for anything that is sensitive, whether travelling or not. This is an archaic solution and there are multiple better options. Last November, I reported on the Chinese state-sponsored threat groups that had compromised multiple network operators to plant keyword-and user-hunting malware in the SMS centres themselves.
That same month, a German security firm warned that RCS is little better, with deployments “badly protected in many networks, allowing hackers to fully take over user accounts.” The researchers claimed that the RCS vulnerabilities include caller ID spoofing, user location tracking and message interception.
The answer, of course, is end-to-end encryption. The way this works is to remove any “man-in-the-middle” vulnerabilities by encrypting messages from endpoint to endpoint, with only the sender and recipient holding the decryption key. This level of messaging security was pushed into the mass-market by WhatsApp, and has now become a standard feature of every other decent platform.
Such is the security of this architecture, that it has prompted law enforcement agencies around the world to complain that they now cannot access a user’s messages, even with a warrant. There is no backdoor—the only option is to compromise one of the endpoints and access messages in their decrypted state. Somewhat ironically, when the U.S. National Security Agency published a recent advisory on messaging, top marks went to the platforms that encrypted this way.
You should not use a messaging platform that is not end-to-end encrypted, it really is as simple as that. And so there’s genuine reason to celebrate the news that suggests Google has taken this to heart, and plans to update RCS with this level of security. As reported by 9to5Google which has studied a leaked internal development version of Google Messages, “we’ve found that work is well under way to allow you to send end-to-end encrypted messages via RCS.”
There are, apparently, multiple references to end-to-end encryption in the code, but little more than that is yet known. One thing that would certainly be a game-changer would be some form of standardized RCS end-to-end encryption that allows secure messages to be sent outside Google Messages. We do know that, just like iMessage, this new approach will failover to SMS/MMS if a user cannot receive the encrypted variant or if bandwidth is insufficient on either end.
There are a wide-range of other unknowns, of course, as the debate around messaging encryption continues. In the U.S., the EARN-IT bill working its way through Congress is an attempt to mandate backdoors into messaging platforms, severely weakening their security layers. WhatsApp owner Facebook, it now seems, is experimenting with other forms of safety analytics that don’t involve unpicking the encryption itself. We will soon find out if that appeases critics.
This is a major development—given the combined efforts of Google and the mobile networks, RCS will be the fastest deployed messaging technology of all time. Removing the critical flaw that seriously detracts from its usability is a huge win for the billions of you who should only use it with this added protection.
Paypal to allow users to buy, hold and sell four cryptocurrencies
“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly,” said Dan Schulman, president and CEO, PayPal.“Our global reach, digital payments expertise, two-sided network, and rigorous security and compliance controls provide us with the opportunity, and the responsibility, to help facilitate the understanding, redemption and interoperability of these new instruments of exchange. We are eager to work with central banks and regulators around the world to offer our support, and to meaningfully contribute to shaping the role that digital currencies will play in the future of global finance and commerce.”
This is great news for crypto but I’m told it shouldn’t have been entirely unexpected In June, there was a report that Paypal was working on direct crypto sales.
Nokia awarded contract to build 4G network on the moon
Nokia has been awarded a contract to establish a 4G network on the moon. The contract is one of several that NASA is awarding to companies as it plans a return to the moon.
The $14.1 million contract was given to Nokia’s US subsidiary and is a small part of the $370 million total awarded to companies such as SpaceX. The cellular service will allow astronauts, rovers, lunar landers, and habitats to communicate with one another according to Jim Reuter, the Associate Administrator for NASA’s Space.
The 4G network that Nokia will build will be miles superior to the form of communication that was used during the early missions to the moon.
This is not Nokia’s first attempt to launch an LTE network on the moon. It planned to do so in 2018 in collaboration with PTScientists, a German space firm, and Vodafone UK to launch an LTE network at the site of the Apollo 17 landing but the plan never came to fruition.
Stripe acquires Nigeria’s Paystack for $200M+ to expand into the African continent
When Stripe announced earlier this year that it had picked up another $600 million in funding, it said one big reason for the funding was to expand its API-based payments services into more geographies. Today the company is coming good on that plan in the form of some M&A.
Stripe is acquiring Paystack, a startup out of Lagos, Nigeria that, like Stripe, provides a quick way to integrate payments services into an online or offline transaction by way of an API. (We and others have referred to it in the past as “the Stripe of Africa.”)
Paystack currently has around 60,000 customers, including small businesses, larger corporates, fintechs, educational institutions and online betting companies, and the plan will be for it to continue operating independently, the companies said.
Terms of the deal are not being disclosed, but sources close to it confirm that it’s over $200 million. That makes this the biggest startup acquisition to date to come out of Nigeria, as well as Stripe’s biggest acquisition to date anywhere. (Sendwave, acquired by WorldRemit in a $500 million deal in August, is based out of Kenya.)
It’s also a notable shift in Stripe’s strategy as it continues to mature: Typically, it has only acquired smaller companies to expand its technology stack, rather than its global footprint.
The deal underscores two interesting points about Stripe, now valued at $36 billion and regularly tipped as an IPO candidate. (Note: It has never commented on those plans up to now.) First is how it is doubling down on geographic expansion: Even before this news, it had added 17 countries to its platform in the last 18 months, along with progressive feature expansion. And second is how Stripe is putting a bet on the emerging markets of Africa specifically in the future of its own growth.
“There is enormous opportunity,” said Patrick Collison, Stripe’s co-founder and CEO, in an interview with TechCrunch. “In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050.”
For Paystack, the deal will give the company a lot more fuel (that is, investment) to build out further in Nigeria and expand to other markets, CEO Shola Akinlade said in an interview.
“Paystack was not for sale when Stripe approached us,” said Akinlade, who co-founded the company with Ezra Olubi (who is the CTO). “For us, it’s about the mission. I’m driven by the mission to accelerate payments on the continent, and I am convinced that Stripe will help us get there faster. It is a very natural move.”
Paystack had been on Stripe’s radar for some time prior to acquiring it. Like its U.S. counterpart, the Nigerian startup went through Y Combinator — that was in 2016, and it was actually the first-ever startup out of Nigeria to get into the world-famous incubator. Then, in 2018, Stripe led an $8 million funding round for Paystack, with others participating, including Visa and Tencent. (And for the record, Akinlade said that Visa and Tencent had not approached it for acquisition. Both have been regular investors in startups on the continent.)
In the last several years, Stripe has made a number of investments into startups building technology or businesses in areas where Stripe has yet to move. This year, those investments have included backing an investment in universal checkout service Fast, and backing the Philippines-based payment platform PayMongo.
Collison said that while acquiring Paystack after investing in it was a big move for the company, people also shouldn’t read too much into it in terms of Stripe’s bigger acquisition policy.
“When we invest in startups we’re not trying to tie them up with complicated strategic investments,” Collison said. “We try to understand the broader ecosystem, and keep our eyes pointed outwards and see where we can help.”
That is to say, there are no plans to acquire other regional companies or other operations simply to expand Stripe’s footprint, with the interest in Paystack being about how well they’d built the company, not just where they are located.
“A lot of companies have been, let’s say, heavily influenced by Stripe,” Collison said, raising his eyebrows a little. “But with Paystack, clearly they’ve put a lot of original thinking into how to do things better. There are some details of Stripe that we consider mistakes, but we can see that Paystack ‘gets it,’ it’s clear from the site and from the product sensibilities, and that has nothing to do with them being in Africa or African.”
Stripe, with its business firmly in the world of digital transactions, already has a strong line in the detection and prevention of fraud and other financial crimes. It has developed an extensive platform of fraud protection tools, but even with that, incidents can slip through the cracks. Just last month, Stripe was ordered to pay $120,000 in a case in Massachusetts after failing to protect users in a $15 million cryptocurrency scam.
Now, bringing on a business from Nigeria could give the company a different kind of risk exposure. Nigeria is the biggest economy in Africa, but it is also one of the more corrupt on the continent, according to research from Transparency International.
And related to that, it also has a very contentious approach to law and order. Nigeria has been embroiled in protests in the last week with demonstrators calling for the disbanding of the country’s Special Anti-Robbery Squad, after multiple accusations of brutality, including extrajudicial killings, extortion and torture. In fact, Stripe and Paystack postponed the original announcement in part because of the current situation in the country.
But while those troubles continue to be worked through (and hopefully eventually resolved, by way of government reform in response to demonstrators’ demands), Paystack’s acquisition is a notable foil to those themes. It points to how talented people in the region are identifying problems in the market and building technology to help fix them, as a way of improving how people can transact, and in turn, economic outcomes more generally.
The company got its start back when Akinlade, for fun (!) built a quick way of integrating a card transaction into a web page, and it was the simplicity of how it worked that spurred him and his co-founder to think of how to develop that into something others could use. That became the germination of the idea that eventually landed them at YC and in the scope of Stripe.
“We’re still very early in the Paystack payments ecosystem, which is super broken,” said Akinlade. The company today provides a payments API, and it makes revenue every time a transaction is made using it. He wouldn’t talk about what else is on Paystack’s radar, but when you consider Stripe’s own product trajectory as a template, there is a wide range of accounting, fraud, card, cash advance and other services to meet business needs that could be built around that to expand the business. “Most of what we will be building in Africa has not been built yet.”
Last month, at Disrupt, we interviewed another successful entrepreneur in the country, Tunde Kehinde, who wisely noted that more exits of promising startups — either by going public or getting acquired — will help lift up the whole ecosystem. In that regard, Stripe’s move is a vote of confidence not just for the potential of the region, but for those putting in the efforts to build tech and continue improving outcomes for everyone.
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