Alternative Finances

Uncertainty Edition: Samsung, Jet And The IPO Market

With the tragic events in Paris this weekend, all news-watching eyes have rightfully been glued to that story and the details as they emerge. The team at PYMNTS joins with the rest of the world in sending our thoughts and prayers to the citizens in Paris during this sad time.

So, as we all try to get back to normal this morning, we have the data you need to get this week in payments off and running. Last week, all the cool kids were playing with P2P, Marc Andreessen was bullish on the IPO market, despite everyone else saying that the bubble was deflating, and Amazon challenger Jet.com saw some unexpected traction.

Ready to know what to watch? Data Dive is ready for you.

The Other Big P2P Announcement Last Week

As is Apple’s recent custom, the gang in Cupertino managed to run off with all the mobile payments headlines with the announcement that it might, at some undisclosed point in the future, expand Apple Pay into person-to-person payments.

It may or may not be doing that in collaboration with some large mainstream banking partners, and those banking partners may or may not be in talks with Apple that may or may not move forward. It’s all still pretty hazy, despite reports in both The Wall Street Journal and The New York Times that Apple isn’t denying the rumors.

Rather more fleshed out, on the other hand, were last week’s other big announcements about mobile P2P.

According to recent reports, Samsung may use its Samsung Pay mobile payments service to launch the next generation of P2P payments, which are not so much person-to-person as they are phone-to-phone.

The Korean press is reporting that Samsung is currently implementing technology that would allow payments to be exchanged between smartphones using NFC.

Samsung Pay leverages both NFC and Magnetic Secure Transmission (MST) tech to facilitate payments. According to sources within the firm, allowing users to make transfers via their phones is the next logical extension of its payments platform.

BusinessKorea further reported that mobile payments startup Hankook NFC has already applied for a patent to enable technology to work with Samsung Pay and NFC — technology that could theoretically be used to make it possible to tap Samsung phones with Samsung Pay for transfers of money between devices.

“If Samsung Electronics expands the application of the NFC payment module, smartphones with Samsung Pay can be used as mobile payment devices. Accordingly, it is possible to not only transfer money between smartphones but also pay with credit cards,” said an unnamed source from a FinTech company.

Allowing users to transfer money between themselves also lends itself well to the theory behind Samsung Pay, which is that mobile payments need to be a live option for users in a maximum number of cases in developed and developing economies.

That same mindset is what drove the firm’s acquisition of LoopPay and the incorporation of its patented MST technology. MST, because it emulates a magnetic card swipe, means that Samsung Pay, more or less, works at any terminal that today accepts any mag stripe or EMV card.

Samsung Pay works on Galaxy S6, S6 edge, Note5 and S6 edge+ devices operating on AT&T, T-Mobile, Sprint and U.S. Cellular networks in the United States.

Marc Andreessen Is Bullish On IPOs (And Thinks You Should Be, Too)

It has not exactly been a fall filled with rapturous enthusiasm in the IPO marketplace. First Data underperformed, and Rocket pulled back HelloFresh’s IPO, allowing it to join Oberthur on the list of 2015 IPOs that almost were.

Square, on the other hand, is going through with its IPO, but as we told you in the Dive last week, it’s making the investment world a little nervous with its prospects. Square is looking to raise a lower-than-expected valuation ($4.2 billion) on a share price of $11–$13. That’s something of a step down from the $6 billion valuation widely assigned to Square after its last funding round.

And it’s looking to raise those billions as it continues to experience net losses. Square also has 2 million shares currently held by Starbucks worth $16.80 a piece hanging over its head. If Starbucks cannot get that far above IPO-rate price, Square is on the hook for the difference.

Ouch, ouch, ouch.

However, while many have eyed Square’s rocky road to IPO with trepidation, venture capitalist Marc Andreessen remains unconcerned.

Shortly after Square announced late last week that the price of its initial public offering shares would be lower than market expectations, Andreessen took to Twitter to discuss what the company’s upcoming IPO means for the tech industry.

Andreessen is not a Square investor; however, his firm, Andreessen Horowitz, was a Twitter investor, and the firms share a CEO.

According to Andreessen, for the tech bubble to actually exist, an irrational amount of exuberance must be extended to the equity markets where the value of tech companies lies. Andreessen further argues that Square’s modest price expectations, in fact, indicate the opposite.

Hint, hint, hint. Maybe the bubble is deflating.

Other Square supporters have also noted that the price range available for the S-1 recently filed with the SEC with the $4.2 billion valuation is less indicative of true price than that which will emerge in the aftermath of the IPO “roadshow” that Jack Dorsey and Square’s executive team will be on for the next several weeks as they try to build and gauge investor interest.

The company with the part-time CEO is losing money hand over fist, and the only revenue boost is coming from a line of business — SMB lending — that has seen the industry leader’s share price gutted by 50 percent or more.

Other than that, it looks like a great bet.

Looking to perk up that interest sum, Square released its “roadshow video” for public consumption this week. In the 40-minute presentation, Jack Dorsey, CFO Sarah Friar and a host of happy small business owners make a pitch for the company as a game-changing payments platform and, by extension, a worthy investment when the shares come to market.

Do Gentlemen Prefer Jet?

Jet entered the market with a big splash and a pile of headlines about how it was going to take on Amazon and Walmart — followed by waves of concerns post-launch. Those concerns became especially acute after Jet abandoned its membership fee, a particularly concerning development because prior to dropping it, it had been the firm’s planned revenue stream.

Pivot?

Jet aimed to break even on the sale of goods and make money on memberships. That, however, did not seem to work out to plan, as inventory concerns and other early roadblocks left consumers not quite ready to sign on as a member.

However, new data indicates that Jet.com might still find its eCommerce groove yet.

Though only 18.6 percent of adults polled had ever heard of Jet.com (that translates to roughly 45 million U.S. consumers), according to the results of a Prosper Insights study, it was interesting to observe just who was shopping on Jet.

Among the consumers who had actually visited or made a purchase on Jet.com, the majority of them (65.2 percent) were male, and most were young — 58.7 percent were under the age of 35. That is a big departure from the trend. Though men and women shop more evenly online than they do in the real world (where women outshop men by a pretty wide margin), women still in general have the edge. More than half (57 percent) of shopping online is done by women, versus 52 percent done by men. Jet’s adoption, some have noted, is somewhat more similar to a tech launch, which tends to trend more heavily male.

Jet’s appeal to male consumers may be a byproduct of its $100 million marketing campaign geared at attracting the heavily online-oriented millennial shopper. Those marketing efforts include invoking spokespeople like comedian and cast member of “Silicon Valley,” Kumail Nanjiani, as well as the “Welcome to the ultimate shopping hack” tagline the site’s ads are sporting.

The other interesting point to note about Jet’s shopping base is that, as a group, it is no stranger to “member’s only” commerce. Jet shoppers were 70 percent more likely than non-Jet shoppers to already be using Amazon Prime, 60 percent more likely to have a Costco membership and 35 percent more likely to be an existing Sam’s Club member.

This may do something to explain why Jet couldn’t make membership work. Their customer base is already all membered out. The question is: Can Jet make money without members?

 

So, what did we learn this week?

To live with uncertainty.

Will Samsung release a P2P platform? Will Apple do the same? Will Square pop or fizzle on the stock floor and will its fate decide the fate of every other tech firm that wants to go public soon? And can Jet turn a young, mostly male client base into the Amazon slayer it was first billed to be?

We don’t know, but we’ll keep you posted with all the data fit to dive into as the answers appear.

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Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the December 2019 Mobile Card App Adoption Study, PYMNTS surveyed 2,000 U.S. consumers for a reveal of the four most compelling features apps must have to engage users and drive greater adoption.

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