Mobile Commerce

Big Picture Edition - What’s Next For Square, Visa And JPMC

There are no shortage of things worth paying attention to out there.

Going into this week, Mobile World Congress is a thing of the past, for another year, and left its usual trail of genuine surprises and enthusiastic hype in its wake.

Super Tuesday (Mar. 1) looms large over tomorrow — a run of primary elections that media pundits say will either be the end of the world as we know it or not amount to much of anything conclusive. Or maybe something in between — cable news has gotten hyperbolic but noncommittal lately.

And Apple is currently involved in the world’s most public battle with the DoJ, which has, more or less, necessitated that anyone with an active Twitter account step up and take a stand — whether they understand the technical, legal and security issues in play or not.

Luckily, when news comes down in torrents, PYMNTS is here with the umbrella to keep you dry and in contact with what might have otherwise washed away like tears in the rain.

So, what do you want to be dialed into when the drama is on high?

Visa: Everywhere The Mobile Economy Wants To Be

"Mobile Is Everything" was the theme of MWC — a sentiment that MPD CEO Karen Webster observed is both entirely accurate writ large and highly misleading when one tries to drill into some mobile use cases, particularly payments and commerce.

“As transformational as mobile has been so far, when it comes to commerce and payments, well, we’re still very much making our way to first base,” Webster noted.

Committed, however, to getting those bases rounded (and keeping consumers on its platform as the world shifts from plastic, albeit slowly) is Visa — a player that has gotten unbelievably serious about the digital economy in a pretty staggering way in the last 18–24 months.

And, last week, MWC offered a nice large stage to highlight its latest and greatest efforts.

Flashier and more headline-generating was its car commerce play. Visa, in partnership with Honda and ParkWhiz, will extend its token service for auto manufacturers to enable car-based commerce transactions.

“The notion of transforming a car into a platform for payments is not as far off as some may think, and we have made a great deal of progress since first introducing the idea one year ago,” said Jim McCarthy, EVP of innovation and strategic partnerships for Visa. “Working with Honda to test these prototypes gets us another step closer toward commercial reality, which we think provides exciting opportunities to everyone who plays a role in the payments and automotive ecosystems.”

Visa’s automotive commerce platform got its first public introduction a year ago at MWC 2015 and is now in the testing phase. The design is intended to streamline the payments process for everyone involved, from the auto manufacturer to the POS operator, by leveraging the near universality of Internet connections.

“This project demonstrates how apps can truly transform the in-car experience, while creating new opportunities for automakers,” said John Moon, developer relations lead for Honda Developer Studio.

“At ParkWhiz, we are very focused on creating a frictionless and, of course, safe parking experience for drivers,” said Aashish Dalal, CEO of ParkWhiz. “Eliminating the need for drivers to take tickets or check out at pay boxes is a giant step toward a frictionless experience and a big win for drivers. ParkWhiz is thrilled to be partnered with Visa on this groundbreaking innovation.”

And while the wonderful world where cars buy their own gas and order coffee is still down the road (pun intended), the arguably bigger announcement out of Team Visa last week was its big partnership in China.

Visa has struck a new deal with China UnionPay (CUP) through a memorandum of understanding (MOU) to collaborate on three key areas in the financial ecosystem: payments security, innovation and financial inclusion.

Signed by both Shi Wenchao, president of China UnionPay, and Visa CEO Charlie Scharf, the deal aims to provide a platform for the two payments networks to come together to “strengthen and create new value for the bank card ecosystem, benefiting consumers, merchants, financial institutions and technology partners,” according to a release on the agreement.

“Visa is delighted to have concluded this MOU with CUP. This is a unique collaboration between two leading industry players to address major challenges facing the payments industry,” Scharf said. “We are excited to be working together on innovation as digital payments transform commerce, resulting in safer, faster and more convenient ways for consumers to pay. Innovation will also play an important role in our joint efforts to expand access to financial services for the underserved. The global payments industry will benefit from these efforts.”

UnionPay is the nation’s largest — and basically only — interbank clearing and settlement system; it also controls and develops the worldwide UnionPay Card acceptance network. Worldwide, there are over 5 billion UnionPay Cards issued.

“The MOU signing is the result of joint efforts by CUP and Visa, representing a new start to our win-win cooperation. As open payment networks, both companies follow the same business model, share the common interest of maintaining their brand rights and promote the core concept of open cooperation. The joint cooperation will have an important influence on the healthy development of the global payments industry, providing cardholders with more convenient, secure and highly efficient payment services,” Wenchao commented.

“CUP stays committed to the philosophy of openness and win-win cooperation,” he continued. “CUP is keen to actively cooperate with relevant parties to innovate and promote the orderly long-term development of the global payments industry, fully respecting the regulatory regime and industry consensus to underpin those efforts.”

Stripe’s Strategic Shift

Stripe has had an undeniably good run so far. As of early 2016, when many other high-profile “unicorn” startups have struggled, Stripe remains a powerhouse. As of January of this year, the payments processing firm saw its valuation rise $5 billion after a big funding round led by Visa. The firm has also been on the receiving end of some high-profile positive press, particularly around deals to process Apple Pay and partner with American Express on expansion.

But Stripe also faces a challenge: Its core business is providing simple business services, like processing card payments for small businesses, and that is not an easy business to make a massive amount of money in. Margins are low by nature. Businesses often outgrow simple services and need to move on to a more robust product, and businesses that don’t grow run a distinct risk of not staying open long enough to be a consistent revenue stream. It's a challenge familiar to those in Stripe’s business sector — most notably Square.

Last week, though, the world got a glimpse at Stripe’s attempt to split the difference on that difficulty by making its offering more robust and more easily upscalable with the launch of a new product: Atlas.

Atlas is designed to offer businesses access to the necessary “building blocks” for starting and growing a global Internet business. That includes the ability to incorporate a U.S. company, set up a U.S. bank account and accept payments with Stripe. It also allows access to basic services, like tax advice from PwC, legal advice from Orrick, Herrington & Sutcliffe and tools from Amazon (including $15,000 in AWS credit).

“While the Internet is theoretically borderless, the majority of the world’s population lives in a country where they don’t have access to high-quality banking or payments infrastructure. Atlas gives entrepreneurs around the world a way to access robust business and banking infrastructure, no matter where they’re from, so they can build an online business that’s global from day one. The same way Stripe took the complex process of setting up online payments and made it easy, Atlas streamlines the tasks necessary to set up a business,” a Stripe blog post about the news reads.

Stripe says that its solution can have a company up and running in a matter of days and at a fraction of the price of previous versions.

In other words, Stripe is offering an easier, cheaper, faster tool to help businesses grow on the platform. A helpful move — both for the merchants it serves and for the future of its bottom line.

JPMC’s Rough Sledding (Except For Starbucks)

While MCW was rolling along, on the other side of the world, JPMorgan Chase was having its Investor Day.

The best news on offer was about Starbucks: The financial behemoth’s payments platform will eventually be in sync with Starbucks in as many as 7,500 locations.

The news from there, however, was less cheerful. The fact remains that the new payments deal may have a ways to go before it starts contributing meaningfully to a company that is finding headwinds just about everywhere else.

Management stated that the current quarter has featured some undesirable declines in the investment banking business, as high as in the double digits, with the energy sector looming like some electric boogeyman over results in that unit.

In fact, as noted by several outlets, including Reuters, JPMorgan is going to boost its reserves, taken to cover losses in the energy book of business, by as much as $500 million (that would grow to as much as $1.5 billion should oil hover at around $25 a barrel for a long period of time).

Looking ahead, the bank is pushing profit goals down the road, and like other players in finance, the pressures of low interest rates, with no real respite coming via the Fed anytime quickly, means that margins will be tough to push higher.

Cost-cutting is one avenue possible, but so far, the company is holding back on that lever toward profits, at least for now. Management signaled during Investor Day that 15 percent returns on tangible common equity will be a 2018 event rather than next year.

That return on equity now stands at about 13 percent.

So, what did we learn this week? It’s all about the next play. Visa’s thinking big and broad, Stripe’s hoping for scale and JPMC is just trying to ride out the storm.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.