Data Dive

New Tricks Edition: Wells Fargo, Amazon And PayPal

There is no shortage of uncertainty to follow in the world today. North Korea is shooting off ballistic missiles, President Trump and the press continue to circle each other warily, the CFPB is going to federal court and the normally calm and peaceful Bill Gates has officially declared war on the mosquito in an attempt to eradicate disease and has said that we need a robot tax to fund social services.

The news week had any number of “to be continueds” to carry us all forward.

So what do we know this week? Wells Fargo is making some changes to how it does business and payments, Amazon is getting a bit swamped by shipping losses and PayPal made a big move on bill pay with a big acquisition.

Ready to dive in?

Wells Fargo’s Payments Facelift

Wells Fargo is making some very big change to its Payments, Virtual Solutions and Innovation Group, with the new structure focused on enhancing the unit’s efforts in the payments market.

The bank has announced a re-centered focus in payments around artificial intelligence and application programming interfaces (APIs) to help increase its payments efforts and speed up opportunities with corporate banking customers.

“Customers want new types of services that make banking and managing finances convenient and easy — without disrupting their ability to interact with us how and when they desire,” said Avid Modjtabai, head of Payments, Virtual Solutions and Innovation, in the press release. “Since the announcement of our Payments, Virtual Solutions and Innovation Group in October, our goal has been to redefine the next generation of capabilities and offerings and to prioritize research and development that elevates the customer experience.”

The expanded efforts will be carried out on a few fronts. The bank created a new Artificial Intelligence Enterprise Solutions team, which is being led by Steve Ellis, head of Wells Fargo’s Innovation Group. The mission for that group is to better leverage data to provide personalized customer service through its bankers and digital channels.

As for APIs, Wells Fargo said the technology lets commercial and corporate banking customers integrate with Wells Fargo products and is focused on piloting new API-based services, which it began at the start of the year.

Small business, commercial and corporate banking payment customers are also soon to be sorted under a single effort — with the goal of accelerating the integration of Well’s payments’ businesses and platforms. The unit is being headed up by Danny Peltz, head of Treasury, Merchant & Payment Solutions. His team will set Wells Fargo’s payments strategy.

Amazon’s Hefty Losses

While most of 2016 was something of a victory march for Amazon.com — particularly when it came to gaining e-commerce ground — those victories came with a cost.

$7.2 billion, to be exact.

Amazon released its Q4 earnings report for 2016, and while the company posted revenue of $43.7 billion, that still clocked in notably below analysts’ expectation of $44.7 billion.

Crunching the numbers on Q4 – it becomes fairly clearly that a lot of that loss was in the retail giant’s cost of shipping for the year.

While in 2015, Amazon showed a net shipping loss of $5 billion, shipping costs grew over 40 percent year on year, hitting $7.2 billion by the end of 2016.

Free two-day shipping, as turns out, is not so much free and definitely starting to take a toll on Amazon’s revenue, especially as the number of goods shipped for free continues to grow as Amazon Prime is ever adding new members.

CEO Jeff Bezos said in the company’s year-end earnings release that more than 50 million items sold on Amazon’s retail site are currently eligible for free two-day shipping, representing an increase of 73 percent from the previous year.

“We’re doing fulfillment for ourselves and for our partners at a much greater clip,” said Amazon CFO Brian Olsavsky in a conference call. “It’s the usual impact of the additional free shipping programs, as well as the shift toward a higher Amazon Fulfilled growth rate.”

Now, before you start to think about a crowdfunding site for Amazon — it is worth nothing that all in all, the firm put up $2.4 billion in profit in 2016, way up from $596 million in 2015. This was largely due to the $12.2 billion in sales Amazon’s AWS cloud computing service raked in over the last year. AWS’ operating profit for the year alone hit over $3.1 billion.

And Amazon is far from taking its high cost of logistics lying down. Over the last year, the firm has also been hard at work building out its capabilities, including Prime Air and ocean freight, trucking, drones and flying warehouses (seriously), which could eventually help quell shipping cost concerns by cutting out payments to third-party logistics providers.

PayPal’s Latest Financial Inclusion Pay

Paying bills is a mild annoyance for most people — but for the financially underserved who can face a multi-step, multi-hour process to pay something as simple as a utility bill, it is far more than that.

But PayPal — with its broad focus on financial inclusion around the world — has decided to add another arrow to the financial inclusion quiver with a big acquisition this week.

PayPal Holdings announced last week that it has acquired TIO Networks, the cloud-based multichannel bill payment processing company, for $2.56 a share, or $233 million. That purchase price represents a 25.2 percent premium to TIO’s 90-day volume-weighted average price as of Feb. 13.

“By acquiring TIO and integrating bill payment into our global payments platform, PayPal adds another key service in our efforts to become a part of a consumer’s everyday financial life. Worldwide, more than 2 billion people do not have affordable access to basic financial services, making it difficult and expensive for consumers to carry out basic financial tasks, including bill payment. TIO’s digital platform and physical network of agent locations make paying bills simpler, faster and more affordable. We are excited by the opportunity to extend this valuable service to our existing customers and welcome new billers and customers to PayPal,” noted PayPal CEO Dan Schulman.

TIO Networks processed more than $7 billion in consumer bill payments in fiscal 2016 and serves 14 million consumer bill pay accounts. There are 10,000 supported billers and direct relationships with several billers within the network itself – which means it can quickly process telecom, wireless, cable and utility bill payments.

TIO also comes fully loaded with about 65,000 retail walk-in locations and mobile and web solutions.

“We founded TIO to make speed and access part of the bill payment experience for the underserved, and we believe that we have created affordable products to serve the needs of all customers,” said Hamed Shahbazi, chairman and CEO of TIO, in the same release. “Our mission fits perfectly with PayPal’s vision to democratize money. As part of the PayPal team, we believe we will accelerate our growth through expanded distribution and continue increasing access to more billers and services.”

Other arrows in the PayPal financial inclusion quiver? Venmo, to make P2P payments tap simple — Xoom, for international remittances — and PayPal Cash, to make buying online for non-carded consumers that much easier.

So what did we learn this week? It is never too late to learn a new trick. For Wells that trick is a new way to organize payments, for Amazon it’s trying to shave some big bucks on shipping, and for PayPal it’s pushing the whole world into the digital economy — wherever they happen to be.

Until next week …

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Latest Insights: 

The Which Apps Do They Want Study analyzes survey data collected from 1,045 American consumers to learn how they use merchant apps to enhance in-store shopping experiences, and their interest in downloading more in the future. Our research covered consumers’ usage of in-app features like loyalty and rewards offerings and in-store navigation, helping to assess how merchants can design apps to distinguish themselves from competitors.

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