This Week In Payments: Regulatory Action, Big IPOs And Shifting Payments Preferences

It’s always a busy week in payments and commerce. But as Karen Webster told Edison Partners’ Chris Sugden during the latest edition of “This Week In Payments,” this week had so much action that it was hard to narrow the field down to just three top developments.

Facebook was sued by nearly every state over antitrust violations, there was a string of blockbuster IPOs and new data demonstrated that consumers – particularly younger ones – are rethinking their relationships with credit. Those all managed to rise to the top of the pile in terms of things that Sugden, managing partner at Edison Partners, said have the potential to “turn the landscape on its head” going forward.

Sugden remains bullish on 2021 prospects for the world of FinTech and commerce, as he believes there’s a rare amount of alignment in terms of what everyone wants to come next.

Even given all the action in the headlines, “everyone just wants to find some balance at this point,” he said. “We want to protect and serve the consumer, but also let the market work.”

Facebook’s FTC Problem

Earlier this week, the Federal Trade Commission (FTC) and 46 states launched a massive antitrust lawsuit against Facebook, accusing the company of “illegally maintaining its personal social-networking monopoly through a years-long course of anticompetitive conduct,” according to a press release.

The FTC is seeking an injunction in federal court that could require divestitures of assets, including Instagram and WhatsApp. It’s a big move, and mostly an unprecedented one, since it’s essentially looking to roll back acquisitions the FTC approved seven or eight years ago.

Sugden said that pre-election, he might have written this off as a case of particularly dramatic saber-rattling to get concessions out of Facebook, but he’s not so sure in the current environment.

He said that going after Big Tech is increasingly becoming a bipartisan issue. Democrats and Republicans are going after this from different angles, he noted, but they’re all targeting Big Tech firms in the name of consumer protection – even though that’s protection that consumers don’t really seem to want.

“I think this whole debate is about: ‘Are these companies truly the ‘town square,’ or are they actually publishers? And are they platforms or publishers in the town square? Can anyone say anything to them?’” Sugden said. “Now, I wonder if we’re into both the right and the left saying together: ‘We’ve got to show America we’re doing something to these folks.’”

Sugden added that tech companies have shown over the past six months just how often they can be their own worst enemies in bringing this kind of attention their way instead of finding ways to diffuse it. It’s a big issue – and not by nature an incredibly clear one.

He said regulators and federal legislators play a bigger role on the regulatory front that some people appreciate, and their decisions will very much affect how the future plays out.

“I’m all for regulation and being sure we do it right, but if you overreach, that has a quick boomerang effect, too,” Sugden said. “It’s a big wild card in all this, and one to keep an eye on.”

The Week In Blockbuster IPOs

Also worth keeping an eye on this week have been DoorDash and Airbnb’s rapidly rising stock prices.

Both staged initial public offerings (IPOs) this week and saw their shares unexpectedly skyrocket nearly immediately. DoorDash stock jumped 85 percent over its IPO price, while Airbnb’s stock jumped 115 percent.

Those massive leaps have caught some flak. Critics called DoorDash’s IPO the most ridiculous of the year, arguing that when the pandemic ends, it will see a pullback as consumers no longer want to eat in.

But that’s an assumption that Sugden sees as just plain wrong. He said things are not “going to start going backwards” the way some analysts are forecasting – a reality he can observe in his own home as he watches his teenage children ordering up DoorDash for dinner individually.

“The convenience is just too great,” Sugden said. “DoorDash is expanding beyond food to retail, which I think is smart because we’ve all become very digital-first as a result of the pandemic. And that is something consumers will stick with. They like the [option to] order online, pick up curbside or have it delivered to [their homes].”

He said Airbnb is an especially interesting case in that the firm managed the turnaround of the year. Sugden said that unlike much of the travel vertical, Airbnb managed to suffer only a single quarter’s blip before returning to profitability as the company revised its platforms to match the times.

Instead of being the place to go for a hip apartment in Paris during a time when no one could (or wanted to) travel, Airbnb became the doorway to secluded mountain cabins that homebound consumers were seeking when they wanted to venture out again, he said.

“So you really have to tip your cap to [Airbnb CEO] Brian Chesky and the whole team,” Sugden said. “They saw it before anybody else did. And you can replicate DoorDash to be honest, or even Uber or Lyft. But I think in this case, to try to replicate what Airbnb has built – that would be a tough, tough road. And you’re going to spend a lot of money trying to buy yourself into that market.”

Millennials’ Changing Credit Habits

According to new PYMNTS research on millennials’ online credit usage, something notable is shifting in the habits of younger consumers, particularly bridge millennials. It’s not that they don’t have credit cards – 90 percent of them do, implying that anyone who wants one and can get one, has one.

But Webster noted that there is an interest in and usage of buy now, pay later (BNPL) products as an alternative to traditional credit card products. Eleven-and-a-half percent of bridge millennials have used a BNPL product in 2020, twice that of the average consumer. And that usage increased by 28 percent between March and September of this year.

Sugden said that’s another case when change isn’t going to go backwards once it gets rolling. He said the cache of having credit cards “of certain colors” (like gold or platinum) as a status symbol is mostly gone. Younger consumers don’t relate that way to cards, and on the whole are far more excited by the control and transparency that BNPL alternatives offer them, he noted.

And he noted that if we’re being honest, this is an area where traditional financial services providers have allowed themselves to fall behind – much to their own detriment.

“What card companies did with fees – the annoyance of [having to] call and get the fee reversed after being a day late in paying – they put themselves in a position to be disrupted,” Sugden said. “They should have owned this market. They should have already locked it up, because this should be a solution within their landscape. But it shows the way disruption and tech companies can move around the bigger companies that just didn’t see the opportunity. It’s so obvious now that it’s here.”

It’s here – and here to stay, Sugden said. But that’s the story of many of 2020’s changes: They aren’t likely to start running backward anytime soon.

He doesn’t believe we’re all going to work remotely forever; people do miss the in-person collaboration they had in their workplace. But working remotely at least part of the time is probably a permanent feature of employment now.

Similarly, Sugden said the drive to find ways to make our lives easier by leveraging digital services will continue, while seeking greater choice when it’s time to check out and pay will be a standard consumer experience.

From where Sugden sits, the future of 2021 and beyond looks bright – particularly for FinTech firms. Or at least bright for the firms that stay busy innovating.

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