6 ms·

$74B is still quite high for the current market

by asd88 4y ago

toomuchtodo 4y ago
The current market so far. Interest rates will rise and CC transactions will migrate over time to less costly rails starting in the next 12-18 months (although Radar, Identity, and other value add products are likely to see continued use and rev growth). Imho, Stripe should've IPO'd at the top ~12+_ months ago. EDIT: @pbriet (HN throttling, can't reply directly to your comment) In the US, Zelle does $490B worth of volume annually (2021), all CC networks combined do about $1.9T (2021). That's significant volume for a real time payment system, and it's not even fully baked within the US financial ecosystem. FedNow [1] [2] [3] rails go live next year with instant settlement, moving up to $500k in value for 5 cents (what the bank partner charges the banking customer is up to them). I expect that to move the needle, considering merchants can charge a CC surcharge per SCOTUS' Expressions Hair Design v. Schneiderman (No. 15-1391) ruling. If you compare India's UPI implementation to CC volume, the open platform is fairly successful [4], hence my thesis (and this pattern is repeated, you'll find, across other economies where a low cost real time payment system is present). CC companies are raising their rates because their margin is soon to be compressed. Ignore BNPL, that's a feature/product masquerading as a business (see: Klarna's down round, Affirms' decline in share price, etc) and regulators are coming for it [5]. TLDR A new fintech product from the Fed is likely to shift higher cost transactions from legacy payment rails to a utility product. [1] https://www.moderntreasury.com/learn/what-is-fednow https://www.moderntreasury.com/learn/what-is-fednow [2] https://frbservices.org/financial-services/fednow/community/news/012521-announcing-pilot-program-participants.html https://frbservices.org/financial-services/fednow/community/... [3] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federal-reserves-planned-instant-payments-service/ https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa... [4] https://www.business-standard.com/article/finance/upi-most-preferred-payment-mode-among-consumers-with-56-share-study-122032200874_1.html https://www.business-standard.com/article/finance/upi-most-p... [5] https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/02/02/regulators-scrutinize-buy-now-pay-later-plans https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
- pbreit 4y ago
  "CC transactions will migrate over time to less costly rails starting in the next 12-18 months" People have been saying that for decades. And in fact the opposite is happening. Visa/MC raising rates. PayPal raising rates. Volume shifting to more expensive BNPL.
  - danielmarkbruce 4y ago
    FedNow hasn't been available for decades. It's a real threat to the entire cc ecosystem.
    - deleted 4y ago
      [deleted]
    - spaceman_2020 4y ago
      UPI in India has effectively killed credit cards as a payment method. Any similar system will likely do the same in the US.
  - HFguy 4y ago
    You wrote --- > "People have been saying that for decades. And in fact the opposite is happening. Visa/MC raising rates. PayPal raising rates. Volume shifting to more expensive BNPL." He wrote--- > "CC companies are raising their rates because their margin is soon to be compressed." He's talking about fees for transactions. Not rates. They are raising rates to make up for the lost fees.
  - toomuchtodo 4y ago
    Timely thread: https://news.ycombinator.com/item?id=32100777 https://news.ycombinator.com/item?id=32100777 (UK lawmakers tell Visa and Mastercard to justify fee rises)
- opportune 4y ago
  BNPL is a feature for large companies to implement themselves or platforms like Shopify, but if you’re not a large company and either not on a platform with BNPL, or like a third party BNPL’s terms better, you’re definitely a target customer for third-party BNPL. So I think third-party BNPL is a legit business though the individual companies have risks of being outmaneuvered or over-reliance on single customers. I agree with your other points though.
gkapur 4y ago
I don't know if I agree. Adyen is worth $45 billion euros (so $45 billion :) .) From their last annual reports, Adyen '21 GPV: $561B +70% YoY; Stripe '21 GPV: $640B +60% YoY but Stripe has ~2x take rate on Adyen because they are more PLG versus Adyen has many more enterprise customers. So $74b is probably about right or maybe even low?
- vmurthy 4y ago
  > So $74b is probably about right or maybe even low? Of course you are assuming that Adyen is somewhat fairly valued :) . That's the problem with comparative valuations IMO. If company A valuation = company B valuation and company A itself is overvalued, it doesn't mean they are both fairly valued,no?
  - kyawzazaw 4y ago
    If the public market is suggesting that, not a bad benchmark to have a quantitative figure.
    - vmurthy 4y ago
      Totally agree. Just something to watch out for. If the market is giving a multiple of 25 today and it drops to 10 in a year , one needs to be aware that’s all
deleted 4y ago
[deleted]

$74B is still quite high for the current market

by asd88 4y ago

$74B is still quite high for the current market

The current market so far. Interest rates will rise and CC transactions will migrate over time to less costly rails starting in the next 12-18 months (although Radar, Identity, and other value add products are likely to see continued use and rev growth). Imho, Stripe should've IPO'd at the top ~12+_ months ago. EDIT: @pbriet (HN throttling, can't reply directly to your comment) In the US, Zelle does $490B worth of volume annually (2021), all CC networks combined do about $1.9T (2021). That's significant volume for a real time payment system, and it's not even fully baked within the US financial ecosystem. FedNow [1] [2] [3] rails go live next year with instant settlement, moving up to $500k in value for 5 cents (what the bank partner charges the banking customer is up to them). I expect that to move the needle, considering merchants can charge a CC surcharge per SCOTUS' Expressions Hair Design v. Schneiderman (No. 15-1391) ruling. If you compare India's UPI implementation to CC volume, the open platform is fairly successful [4], hence my thesis (and this pattern is repeated, you'll find, across other economies where a low cost real time payment system is present). CC companies are raising their rates because their margin is soon to be compressed. Ignore BNPL, that's a feature/product masquerading as a business (see: Klarna's down round, Affirms' decline in share price, etc) and regulators are coming for it [5]. TLDR A new fintech product from the Fed is likely to shift higher cost transactions from legacy payment rails to a utility product. [1] https://www.moderntreasury.com/learn/what-is-fednow https://www.moderntreasury.com/learn/what-is-fednow [2] https://frbservices.org/financial-services/fednow/community/news/012521-announcing-pilot-program-participants.html https://frbservices.org/financial-services/fednow/community/... [3] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federal-reserves-planned-instant-payments-service/ https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa... [4] https://www.business-standard.com/article/finance/upi-most-preferred-payment-mode-among-consumers-with-56-share-study-122032200874_1.html https://www.business-standard.com/article/finance/upi-most-p... [5] https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/02/02/regulators-scrutinize-buy-now-pay-later-plans https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...

pbreit 4y ago
"CC transactions will migrate over time to less costly rails starting in the next 12-18 months" People have been saying that for decades. And in fact the opposite is happening. Visa/MC raising rates. PayPal raising rates. Volume shifting to more expensive BNPL.
- danielmarkbruce 4y ago
  FedNow hasn't been available for decades. It's a real threat to the entire cc ecosystem.
  - deleted 4y ago
    [deleted]
  - spaceman_2020 4y ago
    UPI in India has effectively killed credit cards as a payment method. Any similar system will likely do the same in the US.
- HFguy 4y ago
  You wrote --- > "People have been saying that for decades. And in fact the opposite is happening. Visa/MC raising rates. PayPal raising rates. Volume shifting to more expensive BNPL." He wrote--- > "CC companies are raising their rates because their margin is soon to be compressed." He's talking about fees for transactions. Not rates. They are raising rates to make up for the lost fees.
- toomuchtodo 4y ago
  Timely thread: https://news.ycombinator.com/item?id=32100777 https://news.ycombinator.com/item?id=32100777 (UK lawmakers tell Visa and Mastercard to justify fee rises)
opportune 4y ago
BNPL is a feature for large companies to implement themselves or platforms like Shopify, but if you’re not a large company and either not on a platform with BNPL, or like a third party BNPL’s terms better, you’re definitely a target customer for third-party BNPL. So I think third-party BNPL is a legit business though the individual companies have risks of being outmaneuvered or over-reliance on single customers. I agree with your other points though.

gkapur 4y ago

I don't know if I agree. Adyen is worth $45 billion euros (so $45 billion :) .) From their last annual reports, Adyen '21 GPV: $561B +70% YoY; Stripe '21 GPV: $640B +60% YoY but Stripe has ~2x take rate on Adyen because they are more PLG versus Adyen has many more enterprise customers. So $74b is probably about right or maybe even low?

vmurthy 4y ago
> So $74b is probably about right or maybe even low? Of course you are assuming that Adyen is somewhat fairly valued :) . That's the problem with comparative valuations IMO. If company A valuation = company B valuation and company A itself is overvalued, it doesn't mean they are both fairly valued,no?
- kyawzazaw 4y ago
  If the public market is suggesting that, not a bad benchmark to have a quantitative figure.
  - vmurthy 4y ago
    Totally agree. Just something to watch out for. If the market is giving a multiple of 25 today and it drops to 10 in a year , one needs to be aware that’s all

deleted 4y ago

[deleted]