Today I learned – 30th Jan 2020

Rise of contactless payment reported by Visa and Mastercard

It is so much faster and easier to just tap your card or phone on a reader than to use the chip or swipe. The frictionlessness of this payment method has clearly wowed users enough that it is on a rise, especially in the US.

In the card-present environment, we continue to see meaningful momentum in tap to pay, what we consider to be the most friction-free way to pay in person. We have reached a point where 1 in every 3 card-present transactions that runs over our network is [tax] versus 1 in 4 a year ago this quarter. This past year, we’ve doubled the number of countries whose face-to-face transactions are at least 2/3 contactless.

Transit continues to be a key user case and an important way to habituate tapping behavior. In New York City, on the NPA, Visa crossed 2 million taps in November from the beginning of the pilot and 3 million in January. The FDA recently announced the tap-to-pay expansion to their entire system by the end of 2020, and we are currently pacing a 350,000 Visa taps a week on the MTA and nearly 1 in every 10 transactions in the New York Metro area is a tap-to-pay on a Visa card.

Source: Visa in its Q1 2020 Earnings Call Transcript, provided by Atom Finance

Echoing the sentiment was Mastercard in its Q4 2019 Earnings Call

..On to contactless, where as I said, we’re making real progress. This quarter, contactless made up over 30% of global card-present purchased (inaudible). Contactless provides a frictionless and fast payment experience, which is opening new categories of spend, including displacing cash on small-ticket purchases. The U.S. point for growth on this front and the New York City MTA is a good example of the potential for rapid adoption by consumers. In fact, they surpassed 5 million taps since the launch in May. And the MTA has planned to roll out contactless acceptance system-wide by the end of 2020.

I’m pretty certain that U.S. contactless will keep growing throughout 2020 quite attractively. Because if you look at the numbers of the number of bank partners that have committed to issue contactless cards for a [minute], let’s even forget Apple Pay and Samsung Pay that enable every card through their archive to be used. If you just look at the number of cards, we are talking about 70% of our total cards in the U.S. market will be reissued over this 12-month to 14-month period. My own personal cards are already contactless from Citi.

On the acceptance side, kind of all new terminals going on are embedded with contactless. So (inaudible) large retailers Target and 7-Eleven and CVS have announced that they will accept contactless payments. And in fact, over half of U.S. card-present transactions are now happening at contactless-enabled merchant locations. And when the MT rolls in on system-wide in New York City, and there are other transit systems beginning to do the same in their cities, I think you will get the impetus.

Source: Atom Finance

Vietnam as an important emerging market for Apple

My country was mentioned repeatedly in the latest earnings call of Apple. In a positive light that makes me think that we are going to be, if we are not already, an important emerging market for the Cupertino-based company

Geographically, we established all-time revenue records in many major developed and emerging markets including, among others, the U.S., Canada, Mexico, Brazil, the UK, Germany, France, Italy, Spain, Poland, Thailand, Malaysia and Vietnam.

Source: Seeking Alpha

For iPad, we saw growth in key emerging markets like Mexico, India, Turkey, Poland, Thailand, Malaysia, the Philippines and Vietnam

Source: Seeking Alpha

Phone revenue of $56 billion grew 8% year-over-year, as we saw a great customer response to the launch of our newest iPhones. We set all-time revenue records in several countries, including the U.S. Mexico, the UK, France, Spain, Poland, Thailand, Malaysia and Vietnam.

Source: Seeking Alpha

Productivity and Business Processes keeps leading the margin game for Microsoft

Microsoft has three main business lines:

  • Productivity & Business Processes that includes Office 365 Commercial and Consumer, LinkedIn and Dynamics
  • Intelligent Cloud that includes server products and cloud services led by Azure, and Enterprise service
  • More Personal Computing that includes Gaming, Search, Windows and Surface

Azure likely receives the most attention, yet it is Productivity & Business Processes (PBP) that consistently took the crown in the margin game at Microsoft. In the latest earnings report, Microsoft reported almost 44% margin for PBP

Source: Microsoft
Source: Microsoft

Even though there have been only 2 quarters so far in 2020, the segment has generated more revenue and operating income than the full year 2019

Source: Microsoft

Today I learned – 1st Jan 2020

US lags behind the world in tap-to-pay

The latest annual report by Visa wrote:

Contactless payments—or when a consumer taps to pay at checkout with a contactless card or mobile phone—continues to see strong adoption around the world. In 2019, excluding the United States (“U.S.”), tap to pay had surpassed 50 percent of face-to-face transactions that ran over the Visa network. This is up from less than 30 percent just two years ago. There are now more than 50 countries where tapping to pay represents at least a third of all domestic face-to-face transactions processed on our network, up from 35 countries at the end of last fiscal year.

The U.S. is starting to catch up to this global adoption rate. In 2019, U.S. financial institutions began issuing contactless cards to customers nationwide. There are now more than 100 million Visa contactless cards in the U.S., and we expect that number to grow to 300 million by the end of 2020

Contactless payments can also open up new payment experiences, such as transit. Transit continues to be an important use case for introducing consumers to the benefits of tapping to pay. In 2019, Visa helped launch contactless transit solutions in cities around the world, including Belarus, Edinburgh, Florence, Manchester, Miami, Milan, New York, Rio de Janeiro, Singapore, São Paulo and more—making it easier for people to get around while reducing operating costs for private and public transport operators.

Visa’s 2019 Annual Report

In July, Apple CEO Tim Cook said the following in its earnings call

In the United States, in addition to a successful integration into Portland’s transit system in May, we’re beginning to rollout of New York City transit and will launch in Chicago later this year. In China, Apple Pay launched the payment card for Didi the world’s largest ride hailing provider.

As I’ve said before, transit integration is a major driver of a broader digital wallet adoption, and we’re going to keep up this push to help users leave their wallet at home in more and more instances.

Source: Seeking Alpha

While iPhone and Apple devices are wildly popular in the US, a recent study reported a low adoption rate of 9% of Apple Pay among Apple-device owners. It’ll be interesting to see how transit helps with the adoption of Apple Pay and, as a result, contactless payment in the US. In Omaha, to the best of my knowledge, there is no contactless payment at Walmart. Adoption at such a chain that attracts traffic like Walmart will definitely increase the use of tap-to-pay.

US seemed to have a bigger cash transaction on credit card than the rest of the world

While studying the reports from Visa and Mastercard, I noticed something quite interesting. The US seems to withdraw more cash from credit card each time than the rest of the world. The figures from Visa and Mastercard are pretty similar, signaling a true pattern. The following data is from Visa and Mastercard in the quarter ended Jun 30, 2019.

 Cash Volume ($ billions)Cash Transactions (millions)Average Cash Ticket
US1415$933.33
International49223$219.73
Source: Visa
 Cash Volume ($ billions)Cash Transactions (millions)Average Cash Ticket
US1010$1000.00
International41190$215.79
Source: Mastercard