Shopify has entered the credit card game; Superapps struggling to achieve profitability — is the shine off?; US Banks: Q2 FY23 Earnings;
In this edition:
1️⃣ Shopify has entered the credit card game
2️⃣ Superapps struggling to achieve profitability — is the shine off?
3️⃣ Visa Beats on Earnings but Payments-Volume Growth Slows
4️⃣ JPMorgan’s Greek Fintech Unicorn Draws Regulatory Blitz
5️⃣ US Banks: Q2 FY23 Earnings
6️⃣ Adyen’s bold leap into embedded finance
7️⃣How does Request to Pay work?
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News
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Shopify has entered the credit card game
The commerce giant announced today that it is offering Shopify Credit, a business credit card designed exclusively for its merchants.
The new product marks Shopify’s first pay-in-full business credit card, said Shopify President Harley Finkelstein. It is powered by Stripe and it is issued by Celtic bank, “and accepted everywhere Visa is,” he added
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Superapps struggling to achieve profitability — is the shine off?
For south-east Asia’s so-called superapps and their investors, life is suddenly looking a lot less super.
Nasdaq-listed Grab and Jakarta-listed GoTo have been forced into a retreat over the past 12 months, shedding thousands of jobs and cutting back marginal business units. Their share prices are more than 60 per cent below their listing price.
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Visa Beats on Earnings but Payments-Volume Growth Slows
A continued recovery in international travel — and spending — drove Visa to a better-than-expected quarter. The credit-card company’s earnings, disclosed Tuesday afternoon, beat Wall Street estimates but growth in payments volume slowed from recent quarters.
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JPMorgan’s Greek Fintech Unicorn Draws Regulatory Blitz
Viva Wallet has been in the crosshairs of financial regulators across Europe — and the company has repeatedly fired or pushed out compliance employees who have raised concerns.
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Insights
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US Banks: Q2 FY23 Earnings
The big banks are dealing with a mix of tailwinds and headwinds:
Higher rates: The Federal Reserve hiked rates from virtually 0% in Q1 2022 to a current range of 5.00%-5.25%, with a further increase of 0.25% widely anticipated. This allows banks to charge higher loan rates.
Rising competition: Amid higher rates, the scramble for deposits intensifies. Banks are compelled to offer higher rates to depositors as competition from smaller entities and new market entrants heats up. Apple launched its new high-yield savings account (4.15% APY) in April.
Lending up, investing down: Across the board, banks are seeing a rise in net interest income buoyed by higher interest rates. Conversely, noninterest income sources, like wealth management and investment banking, are experiencing a downturn due to an unfavorable market and a scarcity of IPOs.
Office loan losses: JP Morgan Chase and Wells Fargo have augmented provisions for commercial property loan losses in Q2 FY23, largely due to exposure to offices. As remote work gains traction and layoffs persist, office landlords face mounting challenges, leading some to strategically default on loans to initiate renegotiations.
Regional banks exodus: In a flight to safety, depositors gravitate towards larger banks, putting smaller institutions under pressure to raise deposit rates to retain clients.
Consolidation: In a significant move, JP Morgan Chase acquired a majority of assets and assumed specific liabilities from the beleaguered First Republic Bank in May. This acquisition, facilitated by a federal auction, led to an upfront post-tax gain of $2.7 billion for JPMorgan, offset by projected post-tax restructuring costs of approximately $2.0 billion in 2023 and 2024. Despite First Republic Bank’s struggles, this strategic acquisition is expected to modestly boost JPMorgan’s earnings and generate over $500 million of additional net income annually. First Republic Bank’s 84 branches will continue to operate as usual under JPMorgan Chase.
Source App Economy Insights
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Adyen’s bold leap into embedded finance
Unlocking the power of unified commerce and digital payments for global enterprises, Adyen has evolved from its humble beginnings in 2006 to expand its scope and scale. In 2016, it introduced Adyen for Platforms (AfP) which enabled platforms to seamlessly embed payments into their offerings for SMBs, transcending sales channels and geographical barriers.
But Adyen didn’t stop there. Recognizing the growing demand for greater control over payouts, the company broadened the scope of AfP to add Adyen Issuing (2019), expanding the embedded suite by enabling platforms to issue virtual and physical cards to their SMB customers.
Acknowledging the diverse financial needs of SMBs, Adyen enhanced AfP even further in 2022 with Adyen Capital and Adyen Accounts. Capital allows platforms to proactively offer business financing based on payment data, while Accounts grants instant access to store and manage funds.
Adyen seems to be well on its way to becoming an ultimate provider of embedded financial services. Their single integration includes payments, issuing, capital, and accounts, empowering platforms with unparalleled control and customization options to serve their SMB clients.
When it comes to embedded finance, both Adyen and Stripe offer impressive solutions that draw significant parallels, as shown in Infog 1. But their respective approaches to delivering embedded finance are a bit nuanced.
Unlike Stripe, which relies on niche licenses and partnerships with sponsor banks, Adyen takes a different approach. In addition to their acquiring licenses, they have obtained EU banking and US branch license, developed their own tech stack, and maintained their own balance sheet, creating a full-stack model. Adyen’s full-stack model provides them with greater control and flexibility to expand their embedded finance suite in both the EU and the US.
Adyen has long positioned itself as an enterprise-focused payments solution, catering primarily to large international merchants in retail, technology, hospitality, and e-commerce. To expand its target addressable market, Adyen has ventured into serving mid-market businesses. However, their most significant achievement lies in actively targeting platforms and marketplaces through AfP, enabling them to reach and serve a wide range of SMBs. By developing embedded finance products and testing them with select beta customers, Adyen maintains its agility while expanding and enabling efficient decision-making as it scales up.
Stripe, on the other hand, has carved its niche as a developer-centric platform, growing alongside the startups it has long served. While maintaining its support for creators, SaaS providers, and retail and e-commerce businesses, Stripe has also successfully ventured into serving global enterprises and bigtech companies.
Source WhiteSight
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McKinsey Technology Trends Outlook 2023
Which technology trends matter most for companies in 2023? New analysis by the McKinsey Technology Council highlights the development, possible uses, and industry effects of advanced technologies.
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How does Request to Pay work?
Alright, let’s break down this whole ‘Request to Pay’ thing into easy-to-digest bites. Imagine you run a little online store, and you’ve got a customer who needs to pay you. Or maybe you’re just trying to get your buddy to chip in for last night’s takeout. Either way, ‘Request to Pay’ is about to become your new best friend.
Step 1: Sending the Nudge So, you need to get paid. The starting point is when the you fill the payment details and shoot the request to the payer. It’s like a friendly reminder that says, “Hey, remember that money you owe me?”. You can shoot this over through an app, online banking, or whatever system you’re using. This is your opening move, setting the stage for getting that cash.
Step 2: You’ve Got a Message Now, over on the other side, your customer or buddy gets a notification. It could be an alert on their banking app, a text, or an email. Basically, something pops up to tell them, “Heads up! You’ve got a payment request waiting.”
Step 3: Time to Make Decisions This is when request for payments gets interesting, first two steps are basically a digital notification functionality, now depending on the request to pay implementation the payer can decide the payment method, delay the payout, pay partially, open a conversation, etc. Here’s where your customer or friend gets options. They can take a look at your request and decide to pay you right away (awesome!), or maybe schedule it for payday. If they’re not happy with something or need to pay a different amount, they can send a message back. Worst case, they decide not to pay at all (boo!).
Step 4: Show Me the Money! If all goes well, this is where you get paid. Your customer or pal agrees to the request and decides how they want to send you the money. It could be a bank transfer, card payment, or another fancy digital payment thingy. Once they hit ‘pay’, the money starts moving.
And, that’s it! Request to Pay in a nutshell — a super simple way to ask for and receive money without all the awkwardness or chasing people down. Plus, it works for everyone: people, businesses, and even the government when it’s tax time. It’s like having a polite and super-efficient personal assistant that handles the money talk for you.
Source The Engineer Banker
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Which verticals are going to be the first to benefit from embedded B2B payments?
Whether or not competitors in your space are already using embedded finance to stand out from the pack, disruption is coming to your industry.
When looking at B2B payments, our research sees the most quickly transformed verticals being those where businesses are already dependent on digital tools for tracking financial data such as cloud accounting platforms. In these applications, adding cash and payment accounts makes a lot of sense in terms of the speed and sophistication of functionality that innovators can add.
Looking more broadly around business tools such as productivity and collaboration software, and ERP-type functions, it’s the areas where analogue disconnects cause costs, inaccuracies, and delays that will be targeted by embedded finance innovators in the next couple of years.
Innovators in non-financial spaces can help their users extend efficiencies into workflows that involve cash and payments, and by doing this they can differentiate their application and add new revenue streams for their business.
Source Weavr.io
