Tag: Apple Pay

Business, life

Business lessons from Apple. Patience & Perseverance.

by MQDuong1 Comment on Business lessons from Apple. Patience & Perseverance.

We’re all told that patience and perseverance play an important role in our life. Well, they do in business too. Today, I’d like to talk quickly about how Apple, a company with unlimited resources, still relies on patience and grit to bring their products and services to life.

Apple Watch

Apple introduced the first Apple Watch in April 2015. At launch, the product faced plenty of skepticisms over its value propositions, as well as criticisms regarding various features. Although Apple did deserve some of those negative sentiments, the company continued to work hard on all aspects of Apple Watch over the last eight years and ultimately transformed it. The battery life is at least 24 hours on one charge now. The software is significantly better. The interface looks bigger. More importantly, they pivoted Apple Watch to focus on consumer health and safety. Positioning the Watch as a health monitoring gadget unlocked two important benefits to Apple. First, the target population includes not only young tech-savvy consumers, but also health-conscious elderly citizens. Per WSJ:

Wearable devices for tracking health and fitness are the hottest technology among older adults, according to leaders at several aging-tech organizations and companies. The AARP says 28% of older Americans own a wearable and 77% of those people use it daily.

Trish Macvaugh, a 76-year-old Willow Valley resident, began swimming competitively three years ago. She uses her Apple Watch Series 6 to log her heart rate and more particular stats, too. There’s her “swolf” score, the number of strokes taken plus the time it takes to swim a certain length, and her “VO2 max,” the maximum amount of oxygen she takes in during intense exercise.

For tech advice, she turns to fellow resident Susan Culbertson, a 76-year-old retired computer-software trainer. Last fall, Ms. Culbertson created classes at Willow Valley to teach others how to use Apple products. The classes have gotten so popular, they’ve occasionally run out of seats for people in the conference room where they take place.

Second, the pivot elevated Apple Watch to a whole new level that folks no longer consider it a simple device that sends notifications. Think about it this way: No other product on the market has the positioning that Apple Watch has – a high-end timepiece that also provides excellent health monitoring services and comes with an ecosystem. That little market niche is enough to generate billions of dollars in annual revenue for the company.

While Apple Watch is undoubtedly a resounding success, Apple did NOT strike gold at its first try. It took years and a lot of hard work behind the scenes to get there. Even for the most valuable company in the US with unfathomable resources at its disposal.

Apple Maps

Would you believe it if I told you this was Apple Maps in 2012?

Source: The Verge

The embarrassing episode was so disastrous that Apple had to issue a rare public apology. Back then, a lot of people cast serious doubt over the outlook of Apple Maps and whether it could be a competitive alternative to Google Maps. Frankly, after such a horrible display by Apple despite having limitless resources, I don’t blame the critics. I’d have the same reservation.

Nonetheless, Apple Maps today is a vastly improved version compared to its predecessor. The service is so good now that the website Tom’s Guide found it to be superior to Google Maps in Interface, Map Design and especially privacy while being competitive in other aspects. I have been using exclusively Apple Maps since 2019 and had no trouble with it. While my wife and I were in Washington DC last month, we used Apple Maps to navigate and use the public transportation without any hiccup.

Apple Maps has a long way to go before catching up with Google Maps. And I doubt that it ever will. Simply because Apple doesn’t collect data like Google does and Apple Maps is only available on iOS devices. With that being said, being where Apple Maps is now can be considered a success. A success that overcame a nasty public embarrassment and took years to arrive.

Apple Pay

Apple Pay came to the market in 2014, even though work on the service started about a year before that. Nine years later, here is where Apple Pay stands:

  • It makes up 6% of in-store purchases
  • A lot of merchants select Apple Pay as a checkout option due to its seamless experience, fraud protection and popularity.
  • It’s available in 76 countries all over the world

iOS devices are present in almost every country in the world, but Apple Pay is only in about one-thirds of the world. Even that already makes the service arguably the most popular digital wallet out there. Such a success, though, didn’t come over night. There are regulations involved in this type of payment services. There are technical issues that must be solved. Plus, you can’t convince merchants to put Apple Pay on the checkout if it isn’t used by consumers. And consumers won’t develop a habit of using it unless it’s on a lot of merchants’ checkout. Success looks easy, but the work behind it takes more than just a household brand name and ads.

If a company like Apple still needs to grind for success, I don’t see how it should be different for smaller businesses or individuals like us.

Uncategorized

Weekly reading – 4th February 2023

by MQDuongLeave a Comment on Weekly reading – 4th February 2023

What I wrote last week

Banks plan to compete with Apple Pay & PayPal

X1+, a credit card for when things go wrong on travel

Business

Understanding Tesla’s operating leverage. A good post on how Tesla managed to increase its operating margin while vehicles prices dropped

($) Americans Are Gobbling Up Takeout Food. Restaurants Bet That Won’t Change. Quite an interesting trend in the restaurant industry. I have no idea how it will go because my personal experience is conflicted. My wife and I are often marveled at the long line in front of every Chick-fil-A store that we pass by. On the other hand, I saw fast food stores with no line, no car in the parking slot and very few diners. Takeout may increase sales for restaurants, as long as they survive

Aldi, H-E-B among growth leaders in 2022: Report. “Small-format stores are cheaper to build and require less land or space to buy or lease. This allows access to more markets than a larger-format store would. Furthermore, as retailers continue to invest heavily in e-commerce, these smaller stores can act as fulfillment centers for online orders.”

($) Bed Bath & Beyond Used to Be Great. These Two Are Why. Bed Bath & Beyond’s founders serve as an example of honesty, authenticity, frugality and customer orientation. They are not afraid to admit their own mistake, including not realizing the potential of the Internet. At first, when the company’s budget was tiny, the two men used cardboard boxes as trash bins and still make sure both sides of scrap paper are used. I also found it awesome that they finally learned to let go of their creation after being pushed out.

TikTok is driving an offline lift in sales for some brands. Very helpful and interesting examples of how TikTok is helping brands drive sales.

Other stuff I found interesting

First use of Apple Emergency SOS in B.C. may have saved two lives. Apple’s innovation is increasingly proven valuable in real-life crises. Even one of these cases is even worth working on

($) Japan, Netherlands Agree to Limit Exports of Chip-Making Equipment to China. A great triumph for the Biden administration in hampering China’s ambition in this critical area. Without the most advanced materials and technologies from ASML, Nikon and other important manufacturers, China won’t be able to scale their semiconductor operations and bridge the gap to the US

($) The U.S. Consumer Is Starting to Freak Out. Signs of the troubling times to come are here

The highest rail route in northern Europe. “Connecting Norway’s stylish capital with its most picturesque city, the 496km, 39-station Oslo-Bergen railway is one of the world’s most beautiful train journeys.”

The Antidote to Envy. Understanding yourself is the best way to avoid envy

Package Deal: In 1915, Coca-Cola had many imitators. Then it designed a patented bottle nobody could copy. The origin story of the iconic Coca Cola bottle is a fascinating one.

Stats

Mount Olympus on Mars is the tallest mountain in the Solar System, three times as tall as Mount Everest

Customers loaded $3.3 billion onto Starbucks gift cards during the quarter ending December 31, 2022

Mount Washington in New Hampshire experienced wind chill at -108 Fahrenheit degrees or -78 Celsius degrees. Lowest ever recorded in the US

Source: JLL Research
Source: 9to5Mac
Business

Banks plan to compete with Apple Pay & PayPal

by MQDuong1 Comment on Banks plan to compete with Apple Pay & PayPal

Per WSJ:

Wells Fargo, Bank of America, JPMorgan Chase and four other banks are working on a new product that will allow shoppers to pay at merchants’ online checkout with a wallet that will be linked to their debit and credit cards. The digital wallet will be managed by Early Warning Services LLC, the bank-owned company that operates money-transfer service Zelle. The wallet, which doesn’t have a name yet, will operate separately from Zelle, EWS said.

EWS’s owner banks are also trying to cut down on fraud. Customers using their wallet wouldn’t have to type in their card numbers, which can raise the risk of fraud and rejected payments that result in lost sales. 

The banks are still ironing out the details of the customer experience. It likely will involve consumers’ typing their email on a merchant’s checkout page. The merchant would ping EWS, which would use its back-end connections to banks to identify which of the consumer’s cards can be loaded onto the wallet. Consumers would then choose which card to use or could opt out. 

Banks are reacting to the threats from PayPal and especially Apple. The tech giant is moving deeper and deeper into the consumer banking space with the imminent launch of a savings account and BNPL product. Incumbent banks are concerned that Apple will control the customer relationship, rendering banks’ offerings a stepping stone or accessories at best. In “Owning the relationship with your customers. A look at the controversial case of Apple“, I wrote:

Apple is at the peak of their power and having the best relationship ever with users, a relationship that involves other parties such as app developers. The company invests a lot of resources into cultivating the relationship with both end users and app developers. As long as the former is strong (apparently it is now given its strong financial results), it gives Apple enormous bargaining power over anyone who wants to leverage such a relationship. To reduce Apple’s power, the most logical way is to weaken the bond they have with the end users by offering a better alternative, though it’s by no means an easy ask.

There is virtually nothing that these banks can do to stop consumers from buying Apple hardware. Manufacturing a smartphone is not in their circle of competence. As a result, the only way to weaken the bond that Apple forges with consumers is to offer an alternative to Apple Pay. Do that and banks can hope to wrestle back the control over customer relationship. While the plan makes sense, there are major concerns over its practicality.

The first issue is fraud. EWS operates the P2P network Zelle, which enables money exchange between users’ bank accounts. Though popular, Zelle has seen a concerning amount of fraud which attracted criticisms from lawmakers such as Elizabeth Warren. I was personally told that my employer, a bank, hesitated to offer Zelle mainly because of fraud. If EWS cannot solve fraud on Zelle and there is little information on how the new unnamed mobile wallet will minimize fraud, what is to make us believe that will actually happen?

The advantage that Apple has in this area is that their hardware is built as a fraud deterrent. Any Apple Pay transaction needs to be approved either with a Touch or Face ID. And we can bet that Apple won’t make a competitor a native wallet on their devices like Apple Pay.

An argument can be made that since the new wallet challenger will operate like PayPal, which is a massive brand, surely it can replicate PayPal’s success. Well, that’s where the second issue lies. PayPal has a giant network of 380 million consumer and 35 million merchant accounts. Merchants like PayPal because it can help with conversion, while consumers like PayPal because it is widely accepted. One cannot live without the other. How can big banks convince thousands, if not millions, of merchants to display the new checkout button?

To do that, banks first have to convince consumers to use the new shiny wallet. Starting with credit cards is smart since that’s where rewards are. But what about trust? If consumers are unfamiliar with the new wallet’s name, whatever it may be, will they choose it instead of the more established names like PayPal or Apple Pay? Would you choose to pay with “Minh’s Pay” if I had a wallet after my name? That in and of itself is not an easy task.

JPMorgan launched Chase Pay in November 2016, about two years after Apple launched Apple Pay. It’s beyond dispute to say that Apple Pay is a much more successful and popular mobile wallet than Chase Pay. Remember that JPMorgan Chase is one of, if not, the biggest bank in the US. Even they couldn’t get its own proprietary wallet to compete with Apple Pay or PayPal. What are the odds that several banks whose interests may not always align can get the job done when they are several years behind?

Weekly readings

Weekly reading – 22nd October 2022

by MQDuongLeave a Comment on Weekly reading – 22nd October 2022

What I wrote last week

Apple’s pricing strategy

Business

Kroger has to win over Wall Street and Washington on its Albertsons deal – here’s how it plans to do that. It’s entirely plausible that there are operational synergies between the two companies. For instance, instead of having two purchasing departments of 1000 people, the combined company may only need 750 after the acquisition. The combined forces can likely result in more bargaining power and lower item expenses. What I seriously doubt are 1/ whether the two companies can gel together culturally and 2/ whether they have the capability to pull off advertising. Cultural mismatch is among the biggest reasons why acquisitions or mergers fail. The bigger a transaction, the bigger this risk. Regarding advertising, yes, it is a high-margin business. But these two grocers hardly have experience in delivering the kind of advertising that can convince investors that splurging out $25 billion is the best use of their capital. We’ll see.

($) Even After $100 Billion, Self-Driving Cars Are Going Nowhere. “Our driverless future is starting to look so distant that even some of its most fervent believers have turned apostate. Chief among them is Anthony Levandowski, the engineer who more or less created the model for self-driving research and was, for more than a decade, the field’s biggest star. Now he’s running a startup that’s developing autonomous trucks for industrial sites, and he says that for the foreseeable future, that’s about as much complexity as any driverless vehicle will be able to handle. Self-driving companies have fallen back on shortcuts. In lieu of putting more cars on the road for longer, they run simulations inside giant data centers, add those “drives” to their total mile counts, and use them to make claims about safety. Simulations might help with some well-defined scenarios such as left turns, but they can’t manufacture edge cases.“

World’s top chip equipment suppliers halt business with China. The measures sound draconian, but in order to stop China from growing its semiconductor industry, I believe this is what it takes. At least, it will bring the Asian country to the negotiation table

Shein and the Tech Cold War. If you heard about Shein but don’t know much about the company, read this!

NFL Sunday Ticket still up for grabs as Apple pushes for flexibility with game rights. As an Apple shareholder, I do think Apple is doing the right thing by holding its grounds. Apple TV+ is still a minor player in the streaming market and likely unprofitable at this point. Tacking on an NFL package that costs arms and legs wouldn’t make it a profit center overnight. Hence, there needs to be a strong business case for Apple to shell out the kind of money that NFL is demanding. If there is no win-win solution, I’d rather see Apple leave the negotiation.

Apple freezes plan to use China’s YMTC chips amid political pressure. One of the most valuable companies in the world put on hold a product plan which it has been working on for years because of geopolitical conflicts between the US and China.

($) Coming Soon on Netflix: A New Netflix. Content released in batches, instead of the binge model. Focus more on quality instead of quantity. Crackdown on password sharing. A new ads-supported tier. A significant change in culture. A new Netflix is starting to form. Bears will say that because Netflix is doing all the things it said it would never do, that’s a sign of a company in decline. Bulls will argue that the new changes will allow Netflix to compete in a hyper-competitive streaming market. Either way, the company is unlikely to regain its former valuation or the “darling of Wall Street” position that it once held

Is the Uber, Lyft and gig economy battle over workers nearing its end game? It is unreasonable to force companies to pay full-time compensation to workers who want the flexibility of the gig model. Regulators on the left love to enact rules to protect workers’ interest. The intention is great, but they need to find a common ground here. Right or wrong, the fact remains that many workers love the freedom that the gig model offers. Any new regulation needs to take that into account. Plus, additional expenses will eventually be passed onto consumers. Unlikely there is competition as the biggest players like DoorDash, Uber or Instacart will have the scale advantage over smaller companies.

Exclusive: Amazon’s attrition costs $8 billion annually according to leaked documents. And it gets worse. A damning report on employee attrition problem at Amazon. It paints a picture of a company that has serious control issues. Andy Jassy’s reign has been littered with challenges so far. Stock rout, slow growth, miscalculated planning in terms of hiring and warehouse capacity, departure of experienced veterans and leaders, and now this. I am a fan of Amazon and a shareholder myself, but this really gives me some food for thought on the outlook of the company

Source: Twitter

Other stuff I find interesting

New York seems to have a weed store on every corner. None of them are legal. A fascinating read on the unnecessarily complicated situation regarding the legality of marijuana selling and buying in New York.

Why high speed rail hasn’t caught on. The economics of high speed rail (HSR), the bumpiness of the Earth, the technical challenges of building and maintaining safe trains are the main factors why HSR is not yet popping up in many countries

Minerva Lithium uses absorbent material to change the way we extract lithium. The tech here looks very promising, given the importance of lithium in how we advance technologies and how harmful the extraction of lithium is environmentally

Stats

Almost 25% of the world’s sea bed has been mapped

75% of the Time We Spend With Our Kids in Our Lifetime Will Be Spent​By Age 12

As of Q3 2022, Apple Pay captures 44% of in-store mobile wallet transactions

How Americans spend their money
Source: Visual Capitalist
Business

Apple Card will let users save rewards in a high-yield Savings – Apple is building a Super App in the US

by MQDuong1 Comment on Apple Card will let users save rewards in a high-yield Savings – Apple is building a Super App in the US

Per Apple today:

Apple today announced a new Savings account for Apple Card that will allow users to save their Daily Cash and grow their rewards in a high-yield Savings account from Goldman Sachs. In the coming months, Apple Card users will be able to open the new high-yield Savings account and have their Daily Cash automatically deposited into it — with no fees, no minimum deposits, and no minimum balance requirements. Soon, users can spend, send, and save Daily Cash directly from Wallet.

Apple Card users will be able to easily set up and manage Savings directly in their Apple Card in Wallet. Once users set up their Savings account, all future Daily Cash received will be automatically deposited into it, or they can choose to continue to have it added to an Apple Cash card in Wallet. Users can change their Daily Cash destination at any time.

To expand Savings even further, users can also deposit additional funds into their Savings account through a linked bank account, or from their Apple Cash balance. Users can also withdraw funds at any time by transferring them to a linked bank account or to their Apple Cash card, with no fees.

Apple’s savings account marks the second time Apple and Goldman Sachs tag team to launch a financial product (with Apple Pay Later, Goldman Sachs’ role will be less prominent). Apple will take care of the customer experience while the iconic bank will handle the banking side. It makes perfect sense. Who is better than Apple in crafting a great user experience on devices that they manufacture? Apple also does not have any appetite in becoming a bank. Speaking from personal experience, I can tell you that while it’s great for consumers that banking is highly regulated, such regulatory oversight and scrutiny constitute a great deal of overhead for banks.

From Goldman Sachs’ perspective, they have ambition in growing their retail banking business. First, it’s Apple Card. Then, they got the GM portfolio and are said to be launching a T-Mobile credit card soon. Goldman Sachs has the drive and tools to handle the complex and cumbersome banking regulations. However, legendary as an investment bank as Goldman Sachs is, it will have to spend a lot of money on creating a consumer-friendly image as well as on acquiring customers.

The race to book new checking and savings accounts becomes increasingly expensive. Chase rewards new qualified customers who open a new Savings account with $300. I have seen similar offers from other financial institutions. My guess is that Goldman Sachs will have to compensate Apple for every Savings account opened through the Wallet app. The freedom that Apple mandates on the product for their customers means that it will be much more difficult for Goldman Sachs to forecast the cash flow and deposits. On the other hand, whoever opens this Savings account is less likely to close any time soon and Goldman Sachs won’t have to deal with gamers (who signs up to something just for the bonus and then leaves). If there are 10 million Apple Card users in the US, Goldman Sachs could potentially sign up thousands of Savings accounts in no time, due to this partnership.

From a consumer perspective, what are the benefits? Goldman Sachs already has a Savings product with 2.35% APY. I think this new Apple’s Savings account will have a similar yield. More importantly, it is the convenience and customer experience that will be the deciding factor. Instead of going through a bank’s complex application process, users can sign up for an Apple’s Savings account on their phone. Additionally, users can move money in and out of the account seamlessly at any time and instantly. With incumbent banks, it will take several days. We should not underestimate the impact that instant gratification has on user satisfaction.

Apple is building a Super App in the US?

Here is what Apple is currently offering:

  • Hardware: excluding very old models, AirPods and other headsets, all other Apple devices in the wild are capable of conducting transactions. And there are A LOT of them in the US. Whether it’s in stores or online, consumers can use their devices to make or receive a transaction
  • Wallet App/Apple ID: most Apple users use one Apple ID and all information is automatically updated and synchronized across devices, provided that they are connected to Internet. In other words, transactions and rewards earned from the physical Apple Card or a Macbook will show up on an iPhone without any action from a user
  • Apple Pay: arguably the most popular checkout option at counter and online on the market
  • Apple Card: an Apple-branded credit card that offers 2% cash back on everything with Apple Pay as well as 3% at Apple and a few other retailers. Users can also put their Apple purchases on installments with Apple Card. Rewards from Apple Card will be automatically turned to cash in Apple Cash that can be redeemed any time
  • Apple Pay Later: a new yet-to-launch BNPL service that will allow users to break a service into 4 installments with no interest or fees
  • Apple Cash: a service that enables Apple users to send money to and receive money from other people. Like a digital checking account
  • Apple Tap To Pay: this feature allows merchants to turn their iPhones into a payment terminal. A consumer and a merchant only need to put their iPhones close to one another and boom, the transaction is done
  • Order tracking in Wallet: starting with iOS16, Apple users can track their orders right from the Wallet app

In Super Apps, I wrote:

The term Super Apps is generally credited to Mike Lazaridi, the founder of Blackberry, who defined it as “a closed ecosystem of many apps that people would use every day because they offer such a seamless, integrated, contextualized and efficient experience”. In laymen’s terms, a Super App is an application that offers various services on one interface. While the mix of services offered by Super Apps varies from one to another, the common denominators of these apps are 1/ they are all two-sided networks popular with both merchants and consumers and 2/ they all began their journey by being excellent in one function before branching out to others. 

It all started with Apple Pay in 2014. After almost 10 years, Apple Pay is accepted at many merchants in the country and around the world. It’s in the hands of millions of consumers who own Apple devices. Now, other pieces are in place to make Wallet and Apple devices something that consumers will use every day in “a seamless, integrated, contextualized and efficient experience”. I don’t know if the Apple executive team already had this vision a decade ago, but if they did, kudos for patience, long-term vision and execution.

Weekly readings

Weekly reading – 1st October 2022

by MQDuongLeave a Comment on Weekly reading – 1st October 2022

What I wrote last week

The push to grow the complex Bundles by Disney

Decoupling – A great tool to analyze business strategies and disruption

Business

Instacart Offers Grocers the Future of Grocery in a Bundle. Instacart becomes a much more interesting company with these innovations. Pushing a heavy cart around and waiting in line forever just to check out is not a great customer experience. The Caper Cart sounds like a game changer for grocers, shoppers and Instacart. These products are so different economically than delivery services. This helps diversifying Instagram, adding revenue stream and reducing risks.

Why India’s small sellers still don’t trust Amazon. The relationship between Amazon and Indian sellers is so strained that I struggle to see how the company can succeed in this important market.

What Chinese media reveals about Shein’s secretive operations. “There are two main kinds of suppliers: “free on board,” those that make simple designs they haven’t devised themselves, and “original design manufacturers,” those that do both. They all feed into Shein’s sprawling manufacturing execution system (MES). The designer-suppliers will find pictures online and send a selection to Shein’s internal buyers for consideration; the buyer and their manager settle on a final pool. Once samples have been received, there might be two, or even three, rounds of changes before manufacturing can commence. (The entire time, everything needs to be recorded in the MES — materials, pricing, even chat logs — something suppliers balk at, because, if the deal falls through, all the information sits in Shein’s records, and there’s nothing to stop them from producing it elsewhere.). hein is ruthlessly efficient when it comes to evaluating its suppliers, according to analysis by Zhongtai Securities. A scoring system sorts the wheat from the chaff. Timeliness of procurement and delivery, stocking and delivery, rate of defects, and the success rate of new products make up 40% of a supplier’s score. The remaining 60% is based on order volume. They are then tiered into five levels, and the bottom 30% of the lowest tier are culled.”

The Ascendancy of Ahold Delhaize. “Ahold Delhaize USA has been strengthening its position as it looks to take its hyper-local value proposition national. After blockbuster revenue years in 2020 and 2021, Ahold Delhaize has demonstrated that it can keep growing by focusing on omnichannel innovation, prioritizing value and expanding its assortment of high-quality, low-cost private-brand products. “

($) The Unstoppable Rise of Aldi in Britain Shows No Sign of Slowing. “A recent visit to Purley, south London, found the parking lot outside Aldi boasting BMWs, Land Rovers and Porsches and shoppers choosing Aldi over nearby branches of Lidl and Sainsbury, as well as the upmarket Waitrose 10 minutes away. An extra 1.5 million customers have visited Aldi over the past three months. When sales were up by at most the low single digits at most UK supermarkets, they rose 19% at Aldi and 20.9% at Lidl. Part of the strategy is economy of scale. Aldi has about 2,000 key products in store, compared with as many as 30,000 in some large rival supermarkets. By stocking just one ketchup, for example, Aldi has a tight supply chain and can avoid pricing rows like Tesco’s recent spats with Kraft Heinz Co. and Mars Inc.“

How Bryan Lourd became one of the most powerful people in the history of Hollywood. A phenomenal story. Bryan Lourd worked his way from a mail room to being one of the most powerful people in Hollywood.

How Arm conquered the chip market without making a single chip, with CEO Rene Haas. I am not a fan of Nilay or The Verge’s new website look, but this is a great interview on one of the most important players in the chip industry. Especially when Arm is not really a household consumer name

Amazon dominates the $113 billion smart home market — here’s how it uses the data it collects. Amazon has a major trust issue because no matter what the company says, I don’t think consumers trust Amazon to do the right things with their data.

Other stuff I find interesting

Why the Rush to Mine Lithium Could Dry Up the High Andes. “With the world’s car fleets transitioning to electric propulsion, Argentina, with reserves of up to 60 million metric tons, according to government estimates, is well-positioned to profit from the lithium rush. Lax regulation and low taxes make its part of the Lithium Triangle — in the northwestern provinces of Jujuy, Salta, and Catamarca — “especially attractive for foreign investors,” according to Lucas Gonzalez of the National Scientific and Technical Research Council (CONICET), a government agency in Buenos Aires. The country could soon become the world’s second-largest lithium producer, after Australia, and the largest producer from evaporative mining. But every ton of lithium carbonate extracted from underground using this cheap, low-tech method typically dissipates into the air about half a million gallons of water that is vital to the arid high Andes. The extraction lowers water tables, and because freshwater often sits on top of salty water, this has the potential to dry up the lakes, wetlands, springs, and rivers that flourish where the underground water reaches the surface.“

Charging cars at home at night is not the way to go, Stanford study finds. “The move to electric vehicles will result in large costs for generating, transmitting, and storing more power. Shifting current EV charging from home to work and night to day could cut costs and help the grid“

New ways to make more sustainable choices. I’d love to try out these new features, especially the updates on recipes

iPhone 14 Pro Review: No phone is an island. I like Jason’s review of iPhone 14 Pro. A few friends of mine belittled Apple for the lack of innovation. I mean, that criticism is fair when it comes to the lower lineup iPhone 14, but the Pro version is much further ahead with a lot of cool features and innovation. It’s also great financially for Apple, to sell more expensive and higher margin phones, especially when there is shortage of components.

How Apple Pay works under the hood? An example of how complex payments are under the hood and how far technology has come to enable such complexity in mere seconds

Stats

Biden’s plan to cancel student loans will cost taxpayers $400 billion, among the most expensive initiatives his administration puts forward

6000 children died on EU roads in ten years

Amazon commits to hiring 5,000 refugees by the end of 2024. A big YES to this!

Weekly readings

Weekly reading – 14th May 2022

by MQDuongLeave a Comment on Weekly reading – 14th May 2022

What I wrote last week

Uber Q1 FY2022 Results

Book Review – After Steve: How Apple Became A Trillion-Dollar Company And Lost Its Soul

Business

Newest trend in delivery apps: move from cars to e-bikes. Micromobility is great for short-distance deliveries in a busy city like San Francisco. This is how Grab Food, Shopee Food and others manage deliveries in Ho Chi Minh City. Consumers order food within 3-4 kms most of the time. Traffic jam is a feature of the city. If couriers used cars for deliveries, there wouldn’t be any food delivery business! eBikes are also environmentally friendly. I hope to see more innovation and governmental subsidies in this space

John Gruber on the European Commission’s calling Apple Pay an illegal monopoly. I like John’s takes on Apple-related things. He is experienced and more importantly nuanced and fair. “This passage, as well as much of the rest of the E.C.’s “statement of objections”, seeks to dismiss the hard work Apple has done to make Apple Pay successful. Yes, NFC is an industry standard, and Apple Pay is, in part, built on top of that. But before Apple Pay, NFC was hardly used, even though Android had supported it since 2011. When Apple Pay launched in late 2014, its support for the existing NFC infrastructure was so good, it worked with many credit card terminals that had no explicit support for “Apple Pay” specifically. Apple Pay was so easy to use people were using it at retailers who weren’t even Apple Pay partners. That’s not a credit to NFC, which had been in place for years. That’s a credit to Apple. I honestly don’t understand where the E.C. sees anticompetitive behavior with Apple Pay. What I see is market share dominance stemming from the hard work of designing better integration into iOS and iPhones and educating users about the feature. How else could the iPhone’s share of NFC payments so far exceed the iPhone’s share of mobile phone sales? I’m not saying Samsung and Google suck at this, per se, but Jennifer Bailey’s team at Apple is really good, and perhaps just as importantly, really diligent about this sort of thing.”

Congress is ‘moving too slowly’ on semiconductor supply crunch, Commerce Secretary says. The dysfunction and ineffectiveness of Congress, especially in this matter, will cost America a lot both in the short and long term.

Buy Now, Pain Later? An interesting read on BNPL and specifically Affirm

Don’t forget Microsoft. Business schools around the world should teach students about Microsoft and its revival by Satya Nadella.

Business Travel Rebounds as Execs Choose (Real) Face Time Over Zoom. I, for one, am curious about whether business travel will come back to the pre-pandemic levels and how it will come back. During the pandemic, articles were written on how business travel would never be the same. Anecdotally, my colleagues at work traveled to Omaha, Nebraska for monthly meetings and quarterly department reviews as if nothing had happened in the past two years. China remains a question mark. Because they remain persistent on the zero-Covid strategy, they are not a viable destination at the moment. And I hope that the prolonged fight with Covid does not give other variants a chance to spring up. I think we have enough of a pandemic for, let’s say, the next few decades.

Inside the Collapse of CNN+, the News Channel’s ‘Apollo Mission’. The launch of CNN+ seems rushed and more like a political move by some executives than a savvy business initiative

How Gillette Embraced the Beard to Win Over Scruffy Millennials. Gillette went from demonizing beards to embracing them. After years of fruitless resistance and declining sales, they finally realized that their bread and butter product is no longer what men want. More than half of the men in the world don beard, including two-thirds of millennial men. Sensing that the tide they were going against was too strong, Gillette launched new beard-friendly products rolled into a line named King C. Gillette. A deviation from what the company is always known for, but a good strategic shift, I think.

Other stuff I found interesting

Could solar power solve Puerto Rico’s energy nightmare? I can’t imagine living in this day and age without electricity. Especially when that happens in a U.S territory.

Moon soil used to grow plants for first time in breakthrough test. This discovery inspires a lot of questions, possibilities and dreams

Cat Litter Could Be Antidote for Climate Change. I don’t know about you, but I don’t have “cat litter could absorb methane before it goes up in the air” in my 2022 bingo card. But it’s a nice surprise and discovery.

Stats

NYC subway ridership as of March 2022 is 60% of the pre-pandemic levels

Germany has 9% of all bitcoin nodes

“In 2021, U.S. podcast advertising revenues rose to $1.4 billion”

Only 50% of the time when a PayPayer user goes to a site that has PayPal does that user use PayPal

Weekly readings

Weekly reading – 20th November 2021

by MQDuongLeave a Comment on Weekly reading – 20th November 2021

What I wrote last week

My thoughts on Apple Business Essentials

What I think about Apple Pay & Apple Card

Good reads on Business

HelloFresh: Delivering on Process Power. This episode goes deep into the operational aspect of Hello Fresh. I certainly under-estimated it and its operational complexity.

Macy’s CEO, a department store veteran, fights to fit in the Amazon future of retail. Macy is an interesting case study in which its online presence is so valuable that activist investors want it to be publicly traded alone, separate from the physical stores. “Of the company’s 5 million new customers that came in over the second quarter, more than 40% came to Macy’s digitally, Gennette said on the earnings call. In an effort to capitalize on its most valuable customers — those who shop at Macy’s both in-person and online tend to spend three times more than those who only shop at one or the other — Macy’s has invested in data analytics so it can follow when and what they shop, then tailor incentive programs and product messaging to them.”

Breaking Down the Payment for Order Flow Debate. A good read on the payment for order flow debate and why orders on trading apps like Robinhood are halted when there is too much volatility.

Apple is sticking taxpayers with part of the bill for rollout of tech giant’s digital ID card. As an Apple shareholder, it is good to see the power that Apple wields against even the states. As a tax payer, I am quite concerned that the few participating states so far seem to give that much ground to a private company.

The end of “click to subscribe, call to cancel”? One of the news industry’s favorite retention tactics is illegal, FTC says. I am really glad that the FTC intervened to protect consumers. If you want an example of how governments can help citizens, this case is exhibit A.

Airlines Are Rewriting the Rules on Frequent-Flier Programs—Again. “The airline will make it possible to earn elite status without taking a single flight starting in March. Credit-card miles will count more toward status than ever before. Those who are true frequent fliers will get some added benefits, and business travelers who aren’t taking as many trips will be able to boost their status with their spending. Small-business owners and others who use their credit cards a lot now can be a top dog at American before they ever lift the buckle on a seat belt. Delta says it will automatically roll over status that SkyMiles customers have this year to 2022. In addition, it will pool qualifying miles earned this year and next together toward 2023 status requirements. Delta is also offering bonuses to qualify for elite-status tiers faster and is counting the flying that members do on award tickets toward status levels.” Another change that was encouraged by the pandemic. What doesn’t kill you makes you stronger, I guess.

What Went Wrong With Zillow? A Real-Estate Algorithm Derailed Its Big Bet. When you are in a business of risk management and become reckless and carried away by the pandemic, the consequences can be dire.

Stuff I found interesting

Japanese Philosophies That’ll Help You Spend Money Consciously. “Chisoku talks about being content with what you already have. Wabi Sabi talks about finding beauty in imperfection. As things age and decay, they become more beautiful. Mitate teaches us that every object has more than one purpose.”

New Zealand’s 180-million-year-old forest. “While most petrified forests are far removed from the modern forests that grow near them, Curio Bay’s petrified forest, which is a representation of an ancient Gondwana forest of cycads, gingkos, conifers and ferns, still has its descendants in the present-day forests found here. About 80% of New Zealand’s trees, ferns and flowering plants are native having evolved in isolation for millions of years.”

One of the World’s Poorest Countries Found a Better Way to Do Stimulus. “In Togo, a nation of about 8 million people where the average income is below $2 a day, it took the government less than two weeks to design and launch an all-digital system for delivering monthly payments to about a quarter of the adult population. People such as Bamaze, with no tax or payroll records, were identified as in need, enrolled in the program, and paid without any in-person contact.”

Stats

“The state’s venture capital share has jumped from $300 million in 2016, to almost $3.1 billion in 2020 — 866%– according to Crunchbase. That makes it the state with the fastest growing venture capital rate.”

Drug overdose deaths exceeded 100,000 in the U.S in the 12 months ending April 2021

Out of 100 children born prematurely in Vietnam every year, 17 die in the first 28 days. My country has a long way to go in terms of public health.

Image
Source: Dave Ambrose
Business

Thoughts on Apple Pay and Apple Card

by MQDuong1 Comment on Thoughts on Apple Pay and Apple Card

In this post, I want to discuss Apple Pay & Apple Card

Apple Pay

Natively available on almost every Apple device out there, Apple Pay is one of the most popular mobile wallets on the market. In 2020, 92% of mobile wallet transactions funded by debit cards in the U.S were through Apple Pay. This level of popularity can mean a windfall for Apple because for every Apple Pay transaction, the company is reported to earn 0.15% of the volume. In Q1 FY2020, Tim Cook revealed that the annualized Apple Pay volume was at $15 billion. At 0.15% take rate, Apple earns around $22.5 million in extra revenue for, what I would imagine, a very high margin service. Even with that advantage, I believe that Apple Pay still has plenty of potential to realize.

First, the wallet feature is still absent in many countries in Africa, Asia and South America, where a large portion of the world’s population resides. As the adoption of Apple Pay ramps up, it should increase the total transaction volume and consequently some additional revenue for the company. The second lever lies in how Apple Pay is and can be used. As of now, it is most used in online mobile transactions. In-store mobile transactions just don’t gain enough traction as there are only 6 out 100 shoppers that use the service in stores, even 7 years after launch. I don’t expect the in-store trend to change in the future. Where I do see growth opportunities for Apple Pay, though, is in online web transactions. As more customers upgrade from old Macbooks and iPads to more modern versions equipped with Touch ID and Face ID, it will make Apple Pay for web transactions an easier and more seamless experience. Finally, Buy Now Pay Later (BNPL). The whole market is red-hot and Apple is rumored to be working on its own BNPL solution. The big advantage for Apple here is that the feature comes in the Wallet app, which comes natively on every single device. Users don’t need to download any other app to apply. As the concept of BNPL becomes more common due to the popularity of apps like PayPal, Affirm, Klarna or Afterpay, Apple will just ride the coattail and won’t have to spend much money and time educating shoppers on the service.

Of course, I’d be remiss if I didn’t mention that there are also headwinds to Apple Pay. Companies such as Shopify, PayPal, Square, Affirm and Klarna all want to be the go-to app & checkout options for shopping transactions. These companies are well-known in the U.S and many international markets, as well as have enough resources to truly compete with Apple on this front. Hence, it won’t be all rosy roads for Apple Pay, but I do expect it to continue to grow in the future. If PayPal can process over $1.2 trillion in annual payment volume, it’s possible that Apple Pay could rise to $100 billion in volume, meaning $225 million in revenue and almost pure profit for the company. Since there are 1.65 billion installed devices in the wild, $100 billion in volume would translate to less than $100 per device a year. It seems doable to me.

Apple Card

Apple Card is a co-branded credit card issued by Goldman Sachs. The mega bank is about to close the GM portfolio purchase in the next quarter or two. Hence, their credit card balance is mostly, if not entirely, from Apple Card. According to the latest quarter result, Apple Card balance was $6 billion as of September 2021, up from $3 billion just a year ago. In other words, the Apple Card portfolio doubled its outstanding balance in 12 months’ time. The size of a co-brand portfolio is often a private matter, but I managed to find a few as a reference for Apple Card

A portfolio’s outstanding balance changes from day to day. Therefore, these numbers may be very different from now. Plus, these companies have a different business model, brand name and card offering than Apple. Nonetheless, I do think growing a credit card portfolio to $6 billion in loans in two years is not a small feat.

Apple Card’s loans were $6 billion as of Sep 30, 2021. Source: Goldman Sachs

According to Experian and ValuePenguin, the average credit card balance in the U.S has been a tad more than $6,000 between 2019 and 2021. If we apply that number to the Apple Card portfolio, it means that the portfolio has a bit less than 1 million accounts. However, given that Apple Card doesn’t have a big signing bonus or intro offer and it can only earn 2% cash back when used with Apple Pay, I think that the average revolving balance is lower than $6,000. In fact, I think it’s very common that people just get an Apple Card because 1/ they want a nice-looking metal card and 2/ they want to put their big Apple purchase on installments. In the latter case, an Apple purchase should range from $1,000 to $3,000 in most cases. As a result I’d think that Apple Card’s average card balance likely ranges from $2,500 to $4,000.

Average Revolving Balance Per Account# of Accounts (in millions)
$2,5002.4
$3,0002
$4,0001.5
$4,5001.3
$5,0001.2
$6,0001

The number of accounts can determine how much money Apple can get from this arrangement with Goldman Sachs. In the cobrand credit card world, the issuer has to compensate its partner for leveraging its brand. The compensation includes a finder’s fee (a certain amount for a new account opened) and a profit sharing agreement which may be based on interest income or purchase volume, for instance. I have seen smaller brands command $60 per a new account. Hence, it won’t surprise me one bit if Apple can demand a three-digit finder’s fee from Goldman Sachs, given that Apple shoulders all the marketing efforts. At $100 per a new account, 1 million accounts brings in $100 million in revenue for Apple. Even if we factor in the marketing and reward expenses that Apple might incur, it’s possible that Apple can bring in more than the $100 million figure since we know nothing about the profit sharing part between them and Goldman Sachs.

In short, even though these two services have great potential and can bring in meaningful revenue and margin to Apple, given the size of the company, they won’t move the needle much. Instead, they are great value-added services that enhance user experience on Apple devices. With Apple Pay, transactions on every website or app that enable the service are so easy to process. With Apple Card, it’s likely the only product that come with no fees and installment plans every time you make a big Apple purchase. As long as Apple users remain loyal and attached to the company’s devices, these services will have the runway to grow. Remember that Apple Card so far is only available in the U.S.

Disclaimer: I have a position on Apple.

Weekly readings

Weekly reading – 11th September 2021

by MQDuongLeave a Comment on Weekly reading – 11th September 2021

What I wrote last week

I did a quick review to show which remittance services you may want to use to transfer money to Vietnam or India

My reservation on PYMNT’s study on Apple Pay’s usage in stores

Interesting articles on Business

Why the global chip shortage is making it so hard to buy a PS5. “In the silicon manufacturing process, for the most advanced tool inside a fab, typically you’ll have hundreds of different tools. Actually in a large fab, like one you might see at TSMC (Taiwan Semiconductor Manufacturing Company), you’ll have thousands of these tools. And these tools are big machines that process these wafers and do various things. And most tools cost, starting with a couple of million dollars, to the most expensive tools are in excess of 150 million euros. In Asia, they’ll build these things in a year. They’ll move in equipment in the second year, get it qualified, running, by the end of the year. In the US, or in the West, it takes a lot longer, because we don’t have the same mentality they have in Asia. We’re going to do all the permitting, all the hearings, and all that stuff. So it wouldn’t surprise me if it took 50 percent longer to twice as long. Now, let me tell you why that’s a problem. Because to your second question, a modern fab these days, one of the closer-to-leading-edge ones will cost you $10 billion-plus for the smallest efficient scale, and a really efficient scale will probably cost you closer to $20 billion. Think about how much depreciation that can generate. In Asia, the mentality is every day, every hour this thing isn’t running costs me tens of thousands, hundreds of thousands, sometimes millions of dollars. I’ve been in Asia on Christmas Day, and there are people out there with jackhammers and pouring concrete because it was like, “Man, every minute this thing gets done sooner, we can start generating cash.” We do not have that mentality in the West.”

Companies Need More Workers. Why Do They Reject Millions of Résumés? A gap on a resume should not be used to disqualify a candidate immediately. Many need to take a break, whether it was because a family member was sick or it was for their mental health. A less-than-stellar historical record shouldn’t disqualify a candidate either. We all make mistakes and we all deserve chances. Plus, if someone has the necessary skills, does it matter where they got those skills? Does it matter if they don’t have a degree? We use software to evaluate hundreds, if not thousands, of applications a year. It’s understandable. But I do believe that we can write better software to accommodate hiring needs and give people chances.

The surprisingly big business of Library E-books

PayPal To Acquire Paidy. PayPal agreed to acquire Paidy, a BNPL provider in Japan, for $2.7 billion in cash. Paidy reportedly has 700,000 merchants and more than 6 million users. As PayPal itself already has more than 400 million users, this acquisition isn’t likely about inflating the user base. The second reason is likely capabilities. Paidy, which shoppers can use without creating an account first or using a credit card, has a proprietary machine learning models to evaluate credit worthiness of consumers. In other Asian countries, it’s not uncommon for shoppers to pay cash on deliveries for online orders. Perhaps this is something that PayPal wants to replicate in other Asian markets.

Australia’s Top Court Finds Media Companies Liable for Other People’s Facebook Comments. The Court’s argument is that media companies post articles to stimulate conversations and engagement through comments. Hence, they should be liable for such comments. I don’t think that line of reasoning totally lacks solid grounds. I mean, a company’s Facebook page is essentially its property where it has the ability to curate (with Facebook’s help, of course) and it should have some responsibility for defamatory comments taking place there.

Source: CNBC

Stuff that I found interesting

This wildly reinvented wind turbine generates five times more energy than its competitors. This proposal, if materialized, can generate power for up to 100,000 households with one station while reducing the waste that is usually seen with the traditional turbines.

A great series on the study of obesity

Stats that may interest you

Mobile transactions in Vietnam are expected to increase by 300% between 2021 and 2025

Apple has around 52% to 57% of the mobile game transactions market (page 138)

Even though Apple doesn’t have a separate P&L for its line businesses, the Court found that the App Store’s operating margin is approximately 75% (page 145)