Payments Innovation

Sizzle Or Fizzle: Facebook, Online Lending, Cash – And The Twilio Surge

From Facebook to cash, the week’s sizzles and fizzles span a diverse lot. Then there’s tech unicorn, Twilio, which nearly doubled on its first day of trading. Here's why investors should be thinking more fizzle than sizzle.


Cash in Western Europe

While it might not be accurate to say that cash is king in Europe it is still holding a princedom, or at least a respectable barony. While the conventional wisdom is that consumer wallets are slimming down so as to exclude cash, by the numbers, over €2.2 trillion in cash is projected to be in use across the EU through 2020. That compares to €2.1 trillion in 2015.

According to the Global Cash Index, cash is looking alive and surprisingly well in the 15  European countries we examined  — a list that includes Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The big takeaway? Cash is declining sharply in some of the WU-15 — Sweden and Ireland most notably — but to say that the totality of the European economy is moving away from cash is not the reality.


Facebook got some very public — and very unexpected — publicity this week when it (along with Periscope) became the official video streaming service of the Democratic party’s re-enactment of the second act of "Les Miserables" on the floor of the House of Representatives. The revolution may not be televised, but this week Facebook certainly proved that if it happens, they’ll totally have some live video.

But Facebook got the jump on the news cycle this week with the big news that it was opening up Facebook Canvas for retailers and other marketers on the site, as opposed to just advertisers. The HTML5 format allows retailers to create more detailed digital interactions with consumers that can simultaneously incorporate a mix of media including audio, video, text and images.  

So, providing retailers with a new storefront in an ecosystem of 1.5 billion people a month who visit it. Slam dunk sizzle. Is payment enabling those storefronts next?  

Walmart Pay

It’s been a busy seven-day stretch for Walmart Pay.  Last week, Walmart Pay rolled out in Alabama and Georgia. This week it was Minnesota, and then yesterday Walmart really got warmed up and announced the expansion of their new payments service in: Michigan, Virginia, the Carolinas, Indiana, Iowa, Kentucky, Nebraska, North Dakota, South Dakota, Tennessee, Louisiana, Missouri, Mississippi and Washington, D.C.

For those keeping score at home, that puts Walmart in over 3,000 locations (and growing, fast) making it roughly comparable to Starbucks. Walmart, however, is the most visited retailer in the United States with 140 million shoppers per week stepping inside its stores – and with the vast majority of them with smartphones in tow. Online to offline coming to Walmart near you, and we mean that sincerely. Remember there is one within 15 minutes of 90 percent of Americans.  

A pretty clear-cut sizzle.


Online lending  

When the saints come marching in, one wants to be in their number. When the regulators come marching in, getting out of the way is usually a better idea. If getting out of the way isn’t an option, best to brace oneself.

But on the upside, with the various scandals, higher than expected default rates, and a loss of stock market investor confidence that neatly mirrors the diminishing confidence of platform investors, the various online lenders of the nation have likely gotten good at bracing themselves.

In the last several weeks, marketplace lenders have seen announcements of greater forthcoming regulatory scrutiny via the CFPB.  This week, it seemed even more scrutiny is coming, care of the Office of the Comptroller of Currency and various heads of state Federal Reserve Banks.

And that, says the industry, is bad news, as costs of compliance with stricter regulation could be coming at exactly the moment these firms can’t take on any new costs.  

The fizzle wears on.

Costco Card

The Costco Card  has generated a lot of buzz. For Visa and Costco, the buzz had mostly been good — for Amex, not so much. But all that buzz was based on anticipation and the hope that the card would be all it is cracked up to be.

Well, the card has dropped, but unfortunately, it may not be so dearly loved as it was dearly anticipated. There have been some snafus that have left consumers complaining they haven’t received their new card or that they can’t activate it. That has left them sans card since the switch went into effect on Monday. The reaction has been public and intense.

"Costco may live to regret cutting off Amex” one irate member noted.

Probably not what they were hoping for today.


Not all digital currencies make use of some variation on the blockchain, and Ethereum was one such coin that was widely believed to have a bright future. Or at least it did, helped in no small part by the DAO — a crowdfunded investment fund that combines specialized computer code and Ethereum digital currency to automatically execute investment decisions made by its members.

Unfortunately The DAO got hacked and 36 million Ethereum went out the door (valued at between $45 million-$77 million). The flaw was really two flaws that essentially turned the exchange and the blocks the currency is mined from into a broken slot machine that vends over, and over and over. The problem, as it turns out, is unfixable unless 51 percent of miners agree to a fork in the code that will patch the systemic flaw that made the hack possible. White hat hackers (good guys) “stole” the funds remaining in The DAO to prevent further hacking, though that solution is a stop gap.  

Hackers will be able to begin slot machining the system again within a month, unless the fork is put in. The Ethereum community is, surprisingly, split on whether the exploit should be fixed. Yep, folks, this is the other side of open source and permissionless. It’s pretty disturbing that fixing the problem – the right thing to do – is viewed by the purists as the wrong thing to do. Imagine if there were a few more zeros and decimal points behind the 61 …

Twilio’s Excellent IPO Adventure  

Tech is back. Big. Huge.

But maybe only for a little while, since one soaring IPO on a big up day in the stock market does not a unicorn exit strategy make. 

Twilio’s debut on the NASDAQ Thursday was indeed impressive, and likely surpassed the expectations of even the most enthusiastic investors as the shares, priced initially at $15, soared to almost $29, up 92 percent. 

They opened the day 60 percent above the IPO price, which indicates that excitement over cloud communications firms may be on the rise (Acacia, the other tech debut of note this year is still 70 percent above its offer price). In an event, there’s no denying that this unicorn showed some wings, as the last valuation rounds, a little less than a year ago, had pegged the company as being worth $1 billion. Yesterday’s “real” action resulted in a market cap of around $2 billion.  The venture capital backers are no doubt smiling. 

But this is only the third tech IPO debut of 2016, and the first unicorn, and we’re halfway through the year, quite nearly. The dearth is not limited to tech, as overall there have been only 40 new companies brought to market in 2016, and that is down more than 50 percent from last year. So the takeaway is this: Nobody’s selling — and no one’s really buying. 

A few things stand out. 

This is no FinTech or payments unicorn, really, but rather a communications play via app software where top line growth of roughly 88 percent is enough to have the Street looking ahead to some type of profit scenario. The app is indeed popular and is in fact used by Uber.

But consider the fact that the markets were up more than 100 basis points on the scent of a Brexit defeat. Consider the fact that Twilio also had the backing of T Rowe Price, as a holder had indicated interest in 1.5 million shares (10 million total were offered). Suddenly the surge looks less based on fundamentals than fortuitous timing, which does not in fact lend itself to follow on IPOs from other companies, because the stars may not align like this for them. This is not to say that the stock may not continue to rise – or that other tech IPOs may not test the waters ... just that investors should parse the landscape before becoming euphoric that others are buying. 



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.

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