Data Dive

Data Dive: Square, Ripple and Mastercard Embraces The Blockchain

There are now a little over 24 hours left until the election finally happens, and Americans are breaking down into two camps.

No, not Democrats and Republicans.

American is now populated by people who are refreshing their news sources every ten minutes trying to get a last-minute glimpse of the electoral tea leaves — and people who no longer care who wins as long as they never have to talk about the election ever again.

For both groups, we offer the Data Dive today.


Is Square Getting Its Groove Back?

The road on either side of the IPO has been a bumpy one for Square — the payments firm that birthed the more than 200 imitators whom we profile each month in the mPOS Tracker.

Square’s stock price has jumped all around in its first year, hitting a high point of about $16 and bottoming out at $8.  As of late, Square’s stock has almost made a full circle to its IPO price of $12 a share. (As of the writing of this piece, Square’s stock price was $12.17 a share.)  Losses during that first year, however, have been colorfully described as a hemorrhage of red ink.

And while expectations were not overwhelmingly high when Square gave investors the quarterly peek behind the curtain, their earnings managed to generate some good will by beating its own metrics. The firm also felt confident enough to boost guidance for the remainder of the year.

By the numbers, gross payments volumes gained 39 percent to $13.2 billion year over year and were up sequentially from $12.5 billion. That adds up to a total top line for Square of $439 million, a 32 percent gain since last year. The Street had been looking for $430 million.

Lot of red ink remains on the bottom line — net loss per share was nine pennies. That’s better than the net loss of $0.35 in the year-ago third quarter, but net losses are hard to get excited about. For the period that just ended, analysts’ consensus had been at $0.11 in net losses, so Square did again beat expectations.

The good news in the numbers for Square was in gross payments volume from relatively larger sellers. That was up 55 percent year over year and demonstrates good traction on the firm’s stated goal to get scale into the larger sellers.  As a percentage of transactions that come through the company’s processing business, Square said that 43 percent of sales come from merchants boasting annual sales of $125,000 or more. That compares favorably with the 37 percent contribution a year ago.

Square is also loading up on new features, including scheduled deposit offerings and registered cards on file. As for EMV transactions speed, that has been winnowed down to just over four seconds from nearly six seconds.

Square Capital, the cash advance and loan operation, was up 70 percent with 35,000 loans with a total volume of $208 million. That was still an area of decline — Square Capital saw 123 percent growth during Q2.

CFO Sarah Friar says borrowers are returning to the well for loans (and the firm has loaned $1 billion since the capital business launched two years ago).

The quarter was good enough for Square to boost its revenue forecast for the year to a range of $1.69 billion–$1.70 billion, whereas once that tally had been $1.63 billion–$1.67 billion. The Street had been looking for $1.68 billion.


Mastercard Provides API Support For The Blockchain

It might be something of an exaggeration to say that Mastercard fully embraced its inner blockchain this week — but it certainly opened up to developers who want to find a way to innovate blockchain into the MC platform.

Mastercard has added three new blockchain APIs to its development site in an effort to promote experimentation of the tool.

Mastercard’s APIs are linked to its internal blockchain platform, which allows for the creation of payment structures or smart contracts, among other things.  The blockchain APIs are available through its Mastercard Labs unit.

“This is part of our initiative to publish experimental APIs from Mastercard Labs and give developers the chance to work on emerging technologies that haven’t yet been commercialized by us,” explained Mastercard Blockchain Head Justin Pinkham in an interview with CoinDesk. “We believe that there is a role for blockchain in the future of commerce. This future needs to be developed in partnership with banks, merchants and industry participants.”

Mastercard is taking a collaborative approach to leveraging the blockchain, both exploring the technology itself and encouraging developers to use distributed ledger technology to create solutions that Mastercard may want to incorporate in the future.

According to Pinkham, Mastercard is looking into using blockchain for interbank payments — key to cross-border transactions — and trade finance use cases.

“Mastercard’s virtues are well-appreciated by the stock market, but the evolution of mobile payment habits and the rise of blockchain ledger technology could pose longer-term challenges to the company’s wildly profitable business model,” Mastercard investor Sequoia Fund warned of the threat the blockchain could pose to operators of traditional credit card rails like Mastercard.

News of the new APIs follows Visa’s announcement of   Visa B2B Connect, a B2B payments platform for banks that uses blockchain technology to settle cross-border transactions.

While it seems perhaps still a stretch to think the blockchain — as it is currently used — could disrupt Mastercard or Visa, clearly the big players would rather keep their potential enemies close…

And speaking of digital currency…


Ripple CEO Steps Down

It was a big week for executive shake-ups; the bulk of Walmart’s old eCommerce team is moving on, putatively to make way for the incoming team at (which from here on out will apparently be the Walmart eCommerce team).

And while what was the splashiest shake-up of the week, also notable was the announcement from Ripple that Chris Larsen will step down as CEO of Ripple, with COO and President Brad Garlinghouse taking his place effective Jan. 1, 2017.

Larsen will continue to play an active role in the development of the blockchain firm as reports indicate that he will remain a controlling shareholder.

Larsen further noted in a statement that he looks “forward to taking a break from the day-to-day, while staying highly involved in Ripple’s strategic direction.”

Under Larsen, Ripple has raised $93 million from investors, most recently closing a $55 million round last month led by Standard Chartered, Accenture Ventures, SCB Digital Ventures and SBI Holdings.

“I feel good about making this change next year,” Larsen added. “The business is stronger than ever, and we have such an obvious and capable choice for CEO in Brad Garlinghouse. Brad was central to driving the focus and rigor in our organization that’s fueled Ripple’s ascension.”

Ripple under Larsen also courted some controversy — as the firm  publicly questioned the effectiveness of the Global Payments Innovation Initiative set forth by the bank-backed firm  SWIFT.

GPII, Ripple stated, is “an iteration of exactly what SWIFT provides today with a marginal increase in speed for availability of funds.”

In an interview with PYMNTS, SWIFT Head of Payments Initiatives for the Americas and U.K. Region Stacy Rosenthal took a diplomatic stance in response to the criticism.

“There are different perspectives when it comes to [GPII],” she said. “And at the end of the day, there will always be competitors and new market entrants.”

Will it be a kinder, gentler Ripple in the post Larsen era? Time will tell.



So what did we learn this week?

Try new things.  Square is moving up market. Mastercard is flirting, a little, with the blockchain, and Ripple is trying out a new leader.


And, speaking of new things, don’t forget to vote!






B2B APIs aren’t just for large enterprises anymore — middle-market firms and SMBs now realize their potential for enabling low-cost access to real-time payments and account data. But those capabilities are only the tip of the API iceberg, says HSBC global head of liquidity and cash management Diane Reyes. In this month’s B2B API Tracker, Reyes explains how the next wave of banking APIs could fight payments fraud and proactively alert middle-market treasurers to investment opportunities.

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