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Uber’s Loss Leaders, LendUp’s Big Push And Citi’s Continuing Costco Calamity

When it comes to weather, no news is usually good news. Odds are if the whether has become newsworthy, things have gone quite badly wrong. The flooding in Louisiana — and the various tragedies associated with it — is the dark side of this truism. The brighter illustration is that, as of this morning, almost no one is talking about either Hurricane Gaston or Hurricane Hermine. Gaston blew out to sea without ever reaching land, and Hermine, as of yet, has not managed to form. Going into the last week of summer, conditions outdoors are tranquil, if a bit hot.

But for whatever winds were kept at bay in the upper atmosphere, for those watching payments and commerce, the hurricane-force fun never stops. Blowing around last week was the revelation that Uber is good at lots of things, but as of yet, turning a profit isn’t quite one of them. LendUp will be expanding its efforts among subprime borrowers, fresh off a shower of new funding. And speaking of “rain,” Citibank and Costco remain a continual illustration of the old adage “it never rains, but it pours,” as yet another thing went wrong in the great store card transition.

So, did you spend last week at the beach, and now, you’re wondering what happened in the news last week and how to cure that sunburn? Well, we’ve got all the news you missed, and we strongly recommend aloe for the sunburn.


Uber: Lots Of Patrons, Still Looking For A Profit

Depending on how one is inclined to measure progress, Uber‘s is either excellent or lacking.

Business is brisk and booming. The firm is in expansion mode around the world, and the service is widely imitated, largely beloved by its users and, at this point, finds itself pretty securely positioned at the top of the ridesharing heap.


The company still isn’t exactly making any money yet, according to a report out of Bloomberg this week, citing those “familiar with the matter.” In this instance, “familiar with the matter” indicates having overheard recent comments by Uber’s head of finance, Gautam Gupta.

Gupta has reportedly told investors that second quarter losses are up, even in the U.S., where the firm reported a Q1 profit.

Uber lodged losses of around $520 million during Q1, and in the second quarter, those losses have surpassed $750 million, including $100 million in losses in the U.S. That brings Uber’s losses to $1.27 billion in the first half of this year, driven largely by subsidies to Uber drivers.

“You won’t find too many technology companies that could lose this much money, this quickly,” said Aswath Damodaran, a business professor at New York University, in the report. “For a private business to raise as much capital as Uber has been able to is unprecedented.”

Uber is buying business all over the world through subsidies to drivers and riders to get them on board. Add to that the massive legal bills that it pays to everyone with a J.D. after their name in just about every country in the world, and you have a lot of costs.

Some of this is classic matchmaker strategy — subsidize the side you need so that you can get traction. That’s why no one is too worried. Bookings are on the rise, coming in at $5 billion during Q2, up from $3.8 billion in Q1. Net revenue grew around 18 percent, to $1.1 billion in the second quarter from $960 million in the first quarter. And it took Uber only six months to add 1 billion riders, which is a land speed record in and of itself.

While the startup is lodging losses now, Uber bulls remain confident that they are temporary. In July, it inked a deal with Didi Chuxing, the Chinese taxi-hailing app, giving Uber a a 17.5 percent stake in its business and a $1 billion investment in exchange for Uber exiting the China market.

Uber lost $2 billion or more in the two years it was in China, the report noted, so at least a nice tourniquet has been applied to that bleeding.


LendUp’s Pickup

Depending on how you look at it, credit cards will soon see another challenger entering the increasingly crowded ring of contenders forming around them.

LendUp has secured another round of funding, care of YC Continuity, a venture capital fund of Y Combinator, bringing LendUp’s total value to $500 million.

LendUp is taking the card to the subprime borrower and thus the fight to some pretty well-established names in the area — most notably, Capital One. LendUp’s subprime offering comes as an expansion of the L Card first launched last year. The lending limits on the card tend to sit between $300 and $1,000, with annual percentage rates of 19–29 percent, in addition to annual fees.

The four-year-old firm comes to card-based lending from small-dollar, short-term loans with high interest rates. LendUp, however, notes that it is not a typical short-term or payday lender and that its goal is to offer its clients better terms as they gain traction with on-time repayments.

Thus far, LendUp has brought in $200 million in funding, including a $100 million credit facility from Victory Park Capital. That VPC loan enables LendUp to hold the credit card loans that will be extended on its own books, with cash flow to accrue directly to the firm.

Apart from its new patrons, LendUp backers include firms such as QED Investors and Kleiner Perkins Caufield & Byers.

Hopefully, Google will let the L Card advertise on its search engine. You’ll recall that Google banned payday lenders from advertising in the early summer.


Citi And Costco — The Great Kerfuffle Continues 

While we aren’t much for belief in superstition here at PYMNTS, were we the teams at either Citibank or Costco, we might begin to suspect that American Express had placed some kind of curse on us. The transition to the Citi branded Costco cards has been bumpy to say the least.

Things started out hiccupy when a whole bunch of Costco cardholders didn’t have their cards by the date of the big switch.

Things got even more hiccupy a little over a week ago when Citi accidentally sent emails to some Costco costumers informing them that their membership with the wholesale club had expired and their cards were being canceled.


Bigger bummer?

According to Bloomberg, these were still active Costco members with memberships in good standing.

Citigroup said that the emails were only to a “small portion” of customers. Citi further noted that they were only actually intended for a small group of customers that had let their memberships lapse. Once the error was discovered, Citi reports it acted “promptly,” alerted customers of the error and assured them that their accounts remained active.

“We apologize for any concern or inconvenience this may have caused, and please be assured your account has not been compromised,” Citigroup said in an email to cardholders of the Costco Anywhere Visa cards.

The accidental cancellation hiccup carries the additional issue of possible data privacy issues. Some members who received the emails actually got notes intended for other people entirely. Said emails contained the last four digits of other users’ account numbers.

Citi took over the portfolio of Costco Anywhere Visa cards from American Express in June and inherited the services of 11 million customers. Those customers, so far, are reporting being less than enamored with the experience. Citigroup’s social media accounts have been flooded with complaints since the switchover in June, with customers citing everything from lengthy hold times to try and get a customer service rep on the phone to trouble activating their accounts.

Although Citigroup is the world’s largest credit card lender, it has also ranked second-to-last on a J.D. Power survey of credit card customers’ consumer satisfaction four years in a row, according to Bloomberg.

The Costco switchover — laden as it is with unforced errors — seems to give some indication as to why.


So, what did we learn this week?

It’s all about the delivery. Uber has lots of riders and the whole world’s attention; now, it just has to turn those subsidies and new customers into a matchmaker fortress that mints money. LendUp has lots of funding and big goals; now, it just has to do subprime card lending better than anyone else (and make money). And Citi worked hard to break up the Costco-Amex marriage; now, all it has to do is keep itself from being estranged from its customers.


Exclusive PYMNTS Study: 

The Future Of Unattended Retail Report: Vending As The New Contextual Commerce, a PYMNTS and USA Technologies collaboration, details the findings from a survey of 2,325 U.S. consumers about their experiences with shopping via unattended retail channels and their interest in using them going forward.

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