Apple's dominance of mobile wallet debit transactions seems almost complete: according to a survey conducted for Discover's Pulse network, the tech giant now controls a whopping 92 percent share of debit transactions conducted via e-wallet, far outstripping nearest rivals Samsung Pay and Google Pay, responsible for five and three percent respectively. Will such estimates cause legislators and antitrust authorities in Washington, following the lead of their counterparts in Europe and Australia, to look anew at the situation? With debit the gateway for using cards rather than cash and thus in a position to strongly influence any subsequent choice of credit card, Apple, on these findings, has an extremely strong hand when it comes to driving acquisitions of its Goldman Sachs-issued Apple Card. That product came top in the most recent J.D. Power cards satisfaction survey, which found that it was pleasing customers best in the "midsize issuer" category. As noted in this newsletter last week, tech companies are now embedding themselves in so many parts of the payments value chain that issuers cannot avoid vying for their help in reaching consumers. The last attempt to cut the phonemakers off at the pass, Chase Pay, was shuttered earlier this year.
For decades now, following the shining example of Amazon, fintech start-ups have taken the view that investing heavily while postponing concern for profits is the standard playbook for success in the digital realm. As the many failed ventures this century attest, this is of course a far-from-certain strategy but early round investors, if not later shareholders, will certainly be more forgiving of burning through their funds if a solid market position is demonstrably forming. That seems to be the case for Klarna, with volumes in the United States more than trebling in the latest two quarters despite operating costs up tenfold year on year. Having forged deals with the likes of Macy's (now a Klarna stakeholder in fact), H&M and Nike, the Stockholm-headquartered firm added 20 million new customers to its books since the beginning of the year. The question remains if the company, once it moves into the profitmaking phase, can make enough given the looming possibility of regulatory intervention and the proliferation of competing instalment products from lenders both new and established. Its stakeholders meanwhile seem happy to bet on Klarna, with a fresh $1bn of capital raised earlier in the year. Australian BNPL leader Afterpay too reported significantly increased year-on-year losses on its own expansionist strategy, with bad debts, personnel and marketing costs all climbing. Nonetheless, revenues rose by an impressive 78 percent.
With the major American retailers (Target, Macy's, Walmart, Lowe's and Home Depot) beating estimates in their latest round of quarterly reports, Amazon is reportedly considering opening department stores of its own that will be about a third the size of the average traditional model. Although synonymous worldwide with online retail, in fact the company now already possesses a bricks-and-mortar network in the US that is more than 600 stores strong, mainly under Whole Foods or 4-Star branding. Going the other direction, Walmart, slow to get off the ground in e-commerce, is now on track to reach online sales of $75 billion this year: that will be a six percent rise over 2020, though still less than 15 percent of its annual sales volume overall and poor by comparison with Amazon, which continues to relentlessly drive efficiency across its operations. Interestingly, Walmart is opening up its logistics network to retailers of any size in need of last-mile delivery services that can currently reach almost three quarters of the American population.
Other stories of interest this week...
Canada: Record amount of debt paid down amid pandemic
UK: Contactless card limit to rise to £100 [$137] in October
UK: NatWest extends Mastercard's Pay by Bank app
UK: Revolut introduces salary-advance feature
Vietnam: Region's next fintech battleground emerges
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The Weekly News Digest from Verisk Financial Research highlights significant developments that have recently occurred in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value that is often missing from the rolling news cycle.
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