Plaid and Pay By Bank

There are 2 big options: 1) Plaid is expanding its API set and back-end to create a new organic service 2) Plaid is a partner in a new bank service

As I sit down with my coffee this morning I’m asking myself what are the key questions to answer:

  1. What is the Plaid service? What innovation have they created?
  2. Is it a threat to V/MA?
  3. What merchants/Consumers will use it?
  4. What do banks think of this? Can they stop it?
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Short Blog – PayPal and Pinterest

Adding value to small merchants and engaging consumers in new ways. This tie up could certainly fit this goal. However, the financial metrics, Pinterest valuation, user demographic intersection and path to action don’t line up

PayPal and Pinterest – Super Distraction?

What’s behind this deal?

PayPal needs

    1. Increase users and platform engagement (MAU)
    2. Grow the merchant value proposition
    3. Get into the START of a consumer shopping experience
    4. Enable a new mobile first shopping experience – focused on small merchants – from beginning to end (like Alipay)


    1. “Inspiration to Action” – They are missing the action beyond a ad click.
    2. Stalled user growth
    3. 50%+ Revenue growth with consistent operating loss.
    4. 454M Users with ARPU of $5.08/User vs PayPal’s $21/User
    5. Ad Growth to Action. Advertising business with solid advertising relationships with CPGs and large retailers. However you don’t click to buy from a CPG. 
    6. Needs platform to complete consumer journey.
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    Apple Pay Fees (Short Blog)

    Thought I would give more detail on whats going on with V/MA, Issuers and Apple

    Thought I would give more detail on whats going on with V/MA, Issuers and Apple (from WSJ article yesterday Apple Pay Fees Vex Issuers). Perhaps I’ll collect a fee from the WSJ.. odd that I mention Apple Pay fees on Monday to have it come up in the WSJ on Tuesday. Oh well..

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    Payments and the Observer Effect

    Most of you techie’s out there had a physics class at some point and can recall the Observer Effect in Quantum Physics: the act of observation can change the measured results. Observation in payments has become the second largest driver of margin

    Most of you techie’s out there had a physics class at some point and can recall the Observer Effect in Quantum Physics: the act of observation can change the measured results. Observation in payments has become the second largest driver of margin and has enabled many new specialists…. so I thought I’d outline some broad thoughts and tell a few stories. 

    Why is observation important? Payment behavior is truth marked data of what a consumer actually did (offline). While I may search for Ferrari’s, or visit dealership (mobile location) what I actually bought is much more important in predicting behavior and evaluating risk.  Purchase data is the most valuable data for that reason (and issuing banks had a lock on it.. Until about 5 yrs ago). The lock has been broken and payment data has become the “missing link” to unite heterogeneous data sets. 

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    PayPal’s New Mobile Bank

    As predicted.. This is less of a “super app” than a MUCH NEEDED rebundling of services. This is a consumer branding effort.

    Quick thoughts on today’s announcement

    1. Techcrunch
    2. PayPal Blog

    This is a solid product.. Not a “super app” but perhaps the best mobile first bank in the US (and beyond). What is NEW? 

      • Mobile UI to integrate all those heterogeneous apps (and acquisitions)
      • High yield savings account (0.4% APR) powered by synchrony
      • Integration of Honey offers/rebates/loyalty programs
      • Better Direct Deposit/Bill Pay integration (ex faster clearing/availability of direct deposits)
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    PayPal – ?Super App?

    Paypal has clearly won in the massive shift to eCom/mCom during the pandemic. A time where 10 yrs worth of consumer behavior change was compressed into 18 months (behaviors which will stick long-term). However, the future growth story must ride on something else AND Paypal must prove it can generate improving margins within that growth

    PayPal has been my #1 holding for last 5 yrs, and it has been on a fantastic ride… especially so over the last 18 months! (see MVP – Continued Domination for more). 

    Paypal announced 2Q21 earnings 2 weeks ago (7.28). TPV growth was 40% with eBay, 48% without out, while sales grew at a 32% clip without eBay versus 19% with. Earnings? Not so much as margin erosion has hit the business. One core driver of margin has investors particularly concerned: “Take rate” (net merchant revenue less cost to clear payments) fell from 2.21% in the fourth quarter of 2020 to 2.11% in the first quarter and 2.01% in the second quarter. 

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    Short Blog – BNPL Recap

    BNPL specialists have found a way to help merchants serve consumers that were unserved, achieve sales growth and improve consumer experience.

    101 Blog… probably not for the BNPL experts. Recap at bottom. 

    While CDBC may impact debit networks in a 5 yr view, I thought I would write a short blog on BNPL’s impact to credit networks in near term (See Insider’s BNPL market Analysis and MRC’s overview of solution providers)

    Continue reading “Short Blog – BNPL Recap”

    Walmart – Banking and FinTech

    Imagine a world where bank accounts don’t matter. You select services that solve your problems when you have them. Walmart (and Amazon) are unbundling banking.

    As always pardon the typos

    It seems like only yesterday that 30 members of Congress wrote the acting chairman of the FDIC to stop Walmart Bank.

    “Wal-Mart’s plan, to have its bank process hundreds of billions in transactions for its own stores, could threaten the stability of the nation’s payments system,”

    30 Members of US Congress, March 2006

    Of course, we all know that Walmart pursued a different course to deliver services. Partnerships (MGI, Moneygram, Paypal, …) and banking in a box (literally an isle with prepaid cards). Most analysts discount or “write off” Walmart’s achievements in financial services.  Given Walmart doesn’t break out financial performance of Money Center, analysts are left with the tea leaves of MGI and GDOT reports. There is little doubt that comparing Money Center financial metrics to tier 1 banks would leave most unimpressed. However, Walmart has created a portfolio of banking services that supports their overall retail strategy and creates overwhelming loyalty amongst their core customer base.  

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    No Visa/Plaid

    As predicted in my June blog.. We heard today that Plaid will not happen.

    Visa is my second largest holding and I’m buying more tomorrow. Why? Plaid would have been:

    1. Visa is building an amazing team, and Plaid is not the right core (in tech, bank permission or in data rights). 
    2. $5B for a company running at a ~$35M Rev (with Paypal as their largest customer) is beyond “good will”.  Apple’s Ring.. their star ship campus is $5B.. there must be something better to buy than a team of 340.. with 300 of them in screen scraping. 
    3. Data rights. Plaid will likely need to cease and renew all consumer agreements. Few customers are aware that their one time share of bank credentials to link their bank account led to 7 years of access to validate balances.
    4. Bank agreements.. banks certainly want to support the distribution of data under consumer permissions.. but this all starts with the bank and the consumer. A bank can’t grant plaid something it doesn’t have.. this is why Banks can’t give Plaid (or Visa) the agreement they want 
    5. Per my “open banking” blog, Banks are creating their own API service in Akoya. 
    6. Investors should cheer Visa’s pull back here. Less regulatory distraction, less org distraction and more fuel for something that makes sense. 

    As I related in Open Banking, Open Payments and Trust Networks, Operating Agreements are the #1 factor for investors to asses when evaluating network value. Visa/MA Operating agreements to 15+ yrs to establish and to this day take more than 1yr to change. While this is cumbersome, no network can scale without a firm understanding (by all participants) of revenue, risks and operating costs.

    While there may be a technical end run to obtain data and deliver value (aggregation), the hard work of operating agreements must be done. Theoretically, Visa’s existing bank operating agreements could have been extended. After all, they are one of the few entities that have agreement with every bank. But as I mentioned previously, networks become brittle as they expand… their common services become entrenched commodity infrastructure, and most importantly the observation that Trust is Domain Specific, making extension of “trust” in new services … well.. problematic. From my blog:

    As networks scale → network effects take hold. Larger networks become more efficient increasing the value of their core services increases, connection costs drop, and ability to retain each node increases. Payment is becoming a commodity service, and payments specialists functions are being assimilated (as their function MATURES they are no longer special). However, as networks scale, they become more rigid and their ability to create NEW services (beyond payments) diminishes. After all, existing participants connect with a purpose (within an operating agreement). Additionally, trust is domain specific, thus current networks are constrained by BOTH the rigidity that comes with scale and by trust extension.

    Data Games – Battle of The Cloud Part 6

    Understanding flows of data, and the structures in which it is controlled, provides a map of: value, power and margin. What is changing in the flow of data?

    Warning.. biggest blog ever.. So I made a two page summary. 

    Happy New Year! Best to you and yours. Having completed the successful sale of Commerce Signals to Verisk last year, this blog is a reflection on some of my lessons learned as well as my predictions on where I see things headed. The thoughts here are guiding my investments and launch of my next venture. I love the interaction, so please take time to write a comment on any of this. Also I ask for your pardon in advance for typos.. 

    Understanding flows of data, and the structures in which it is controlled, provides a map of: value, power and margin. What is changing in the flow of data? What data is still “unique”? Where is power shifting? My past blogs referred to this dynamic as Rewiring CommerceValue Orchestration and the Transformation of Commercial Networks

    Continue reading “Data Games – Battle of The Cloud Part 6”