E2245 - Payments - November 9, 2022
This week we discuss payments (Visa, Mastercard, PayPal, Block (fka Square), & Stripe) and the recent tech layoffs.
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Tech Layoffs & TFP
We briefly discussed the recent Meta layoffs and Brad Gerstner’s open letter to Mark Zukerberg, titled “Time to get Fit”. Put into context, total factor productivity is actually down year over year - so is there really a labor shortage?
Payments
Back in the good ole days we transacted with cash. Individual businesses would provide ‘credit’ to loyal customers. Diners Club changed all that, adding 3rd party intermediary that provided credit to customers and payment to businesses. The industry evolved from there. It naturally tended toward monopoly/oligopoly status because of the frictions involved with taking multiple forms of payment. Visa (V), Mastercard (MA) and American Express (AXP) reign supreme. Then the internet came along. People wanted to transact over the internet - initially using checks, then later over email with a product called PayPal. PayPal spawned digital payments but ran on the back of the traditional payment infrastructure (ACH, Visa, MC, AXP). Others joined the fray, Square and Stripe in particular. More recently, payments have been embedded as a feature (and revenue stream) in many SaaS products. And then there is crypto… Crypto promised to provide a new backbone on which to operate a payment network. So far that has not played out - in fact, yesterday the Crypto world got turned upside down.. check out this article. Earlier today, Binance has backed out of the FTX rescue plan citing the fact that liabilities exceeded assets by as much as $6 billion. And then, there was the buy now pay later companies… and that’s going… not so well. We won’t cover that here, but if you’d like to dig in further check out Affirm (AFRM), down 88% year to date. Here are links to additional information for the companies we discussed today…
Visa (V) - Year ended 9/30/2022
10-K not yet released
Mastercard (MA) - Quarter ended 9/30/2022
American Express (AXP) - Quarter ended 9/30/2022
PayPal (PYPL) - Quarter ended 9/30/2022
Block (SQ) - Quarter ended 9/30/2022
Stripe (private)
Supplemental Data
1 SuperCompounders
2 Macro
3 Energy
3.1 Oil & Gas
3.2 Metals Powered
4 Tech
Cloud Multiples - Check out the most recent edition of Clouded Judgement for the latest SaaS multiples.
Semiconductors
Semiconductor Industry Association Global Billings Report
Bureau of Economic Analysis Semiconductor Import / Export
Cryptocurrency
Cryptocurrency just had its Lehman Brothers Moment - As of yesterday, the worlds 3rd largest crypto exchange (FTX) is insolvent and being ‘rescued’ by its biggest competitor, Binance. Check out this article for more.
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V 0.00%↑ MA 0.00%↑ PYPL 0.00%↑ SQ 0.00%↑ META 0.00%↑
This post and the information herein are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and all employers and their affiliated persons assume no liability for this information and no obligation to update the information or analysis contained herein in the future.