💳 Fintech Shake-Up
💳 Fintech Shake-Up
The payment landscape is facing disruption
Welcome to the Tuesday edition of How They Make Money.
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In case you missed it:
Apple (AAPL) recently unveiled updates to Apple Pay, including Tap to Cash, a new peer-to-peer (P2P) feature that allows users to transfer money by holding two iPhones together without sharing any personal info.
This is a natural evolution of the existing Tap to Pay feature already available on iPhones for merchants to accept contactless payments. Apple CFO Lucas Maestri highlighted that the company's financial services segment "set an all-time revenue record" in the March quarter.
It’s a recurring theme in the fintech world. Big tech has steadily offered features that directly compete with financial institutions, from Google Wallet to Amazon’s lending program for sellers. As these tech giants leverage their massive user bases and trusted brands, they are increasingly encroaching on the territory of traditional financial players.
While Apple’s ‘Tap to Cash” doesn't address all use cases, industry observers were quick to point out the potential threat to PayPal’s Venmo or Block’s Cash App. This move not only intensifies competition within the P2P payment space but also raises broader questions about the future of the payments industry.
Can financial institutions innovate fast enough to keep pace with Big Tech? Let’s look at some key players in the payment ecosystem and the disruption they may face.
Today at a glance:
Visa & Mastercard: Growth With a Catch
American Express: Premium Play
Fiserv & Adyen: Digital Transformation
Paypal: Dwindling Active Accounts
Block: Cash App Momentum
What’s Next: Crypto and Regulation
Check out our Fintech Innovators article for a comprehensive view of the ecosystem, from payment processors to digital banks.
1. Visa & Mastercard: Growth With a Catch
In case you missed it, we previously reviewed how Visa & Mastercard make money. According to the latest Kantar BrandZ ranking, they are once again among the most valuable global brands in 2024.
⚖️ Swipe Fee Showdown: A legal battle over those pesky swipe fees (the ones retailers pay every time you swipe your card) could shake up Visa and Mastercard's world. A proposed $30 billion legal settlement would give merchants a break on fees and more control over which cards they accept. But a federal judge might toss the settlement. If so, it’ll be back to the courtroom, and who knows what could happen next.
Visa and Mastercard remain confident in their ability to adapt and innovate. To maintain market leadership, they focus on expanding their networks, investing in new technologies, and diversifying their services.
Visa (V) reported steady growth in its Q2 FY24, which ended in March 2024 (Visa’s fiscal year ends in September).
Key Metrics in Q2 FY24:
Payments volume grew 8% Y/Y.
Net Revenue grew 10% Y/Y to $8.8 billion ($0.2 billion beat).
Non-GAAP EPS grew 20% Y/Y to $2.51 ($0.08 beat).
Noteworthy Items:
US Consumer Spending: Credit card spending grew 6% Y/Y in the US, a key market for Visa, indicating sustained consumer confidence.
Cross-Border Travel: International travel rebounded, driving a 16% Y/Y increase in cross-border volumes (excluding intra-Europe).
Value-Added Services: Revenue from security and risk solutions grew 23% Y/Y, showcasing Visa's focus on diversifying its offerings.
Challenges Ahead: