My notes from 2021 Debit Issuer Study

Every year, Pulse, a Discover company, publishes a Debit Issuer Study, which covers the debit card landscape in the U.S. This year’s version is the 16th annual edition of the study and comprises of data from 48 financial institutions of different sizes in the country. If you are interested in the payments as well as financial services world, you should have a look at this study. Below are a few things that stood out the most to me, accompanied by some of my own comments

Debit spend per active account increased as growth in ticket size more than offset the decline in transactions

Unsurprisingly, stay-at-home orders last year curtailed debit transactions as stores were closed and folks were forced to remain at home. As a result, 2020 saw a decline of 2.5% in the number of debit transactions, the first contraction of the industry ever. Most of the damage took place in Q1 and especially Q2 before the use of debit cards recovered in the back half of the year. Compared to 2019, last year saw an increase in debit spend per active account, from $12,407 to $13,550. The increase resulted from 10.5% growth in ticket size despite the drop of 1.3% in the number of monthly transactions per active card.

Annual Spend Per Active Debit Card Increased In 2020 By 9.2%
Figure 1 – Annual Spend Per Active Debit Card Increased In 2020 By 9.2%. Source: Pulse

Whether issuers are subject to the regulated interchange cap determines their unit economics

For issuers with $10 billion in assets or more, they are subject to regulations that cap debit interchange rates. Before we move forward, let’s take a step back to revisit what interchange rate is. Every time a transaction takes place, the merchant involved has to pay a small fee to the bank that issues a debit/credit card that the consumer in question uses. The fee is calculated as % of the transaction value and usually determined by networks like Visa, Mastercard, American Express or Discover. In this case, the Federal Government caps the interchange rate for big issuers that have $10 billion+ in assets. According to the 2021 Debit Issuer Study, exempt issuers earned 42.5 cents every transaction, compared to 23.7 cents for regulated issuers. Due to this difference, exempt issuers generated almost twice as big as regulated issuers in annual gross revenue per active debit account ($132 vs $71).

Exempt issuers earn much higher interchange revenue for debit transactions than regulated issuers
Figure 2 – Exempt Issuers Earn 42.5 Cents Per Every Debit Transaction. Source: Pulse

This is one of the reasons why neobanks can offer debit cards with rewards and no fees. Neobanks or challenger banks are usually technology startups working with exempt issuers to offer banking services. The startup in this partnership takes care of the marketing and the product development while the exempt issuer rents out its banking license and deals with all the banking activities such as underwriting, regulatory compliance or settlement. Because the exempt issuer earns higher interchange rates, it can afford to share part of that interchange revenue with its startup partner which, in turn, uses that revenue to fund operations and generate profit. However, I wonder if it’s really fair when a neobank or a financial service company becomes so big while still taking advantage of this “loophole”. Take Square as an example. It’s a $120 billion publicly traded company. It works with Marqeta and by extension Sutton Bank, which is exempted from the regulations over interchange rates, to offer Cash App. Is it truly fair for Square to be able to leverage this loophole when it has a much bigger valuation than many banks with more than $10 billion in assets?

The rise of Card-Not-Present transactions means the rise of fraud threats

When stay-at-home restrictions were in effect, consumers didn’t shop at the stores and instead switched to digital transactions. Consequently, Card-Present (CP) transactions per active card fell by 10% last year. On the other hand, Card-Not-Present (CNP) per active card increased by 23% and made up for one-third of all debit transactions.

Because CNP transactions are less secure than CP ones (due to lack of customer verification), the growth of CNP during the pandemic led to more fraud incidents. CNP and CP with PIN transactions both made up 34% of debit transactions in 2020. However, while the latter made up only 5% of the total fraud claims, the former were responsible for 81% of the claims. Among the CNP fraud claims, 47% were successfully recovered, meaning that consumers had their money back and merchants lost some revenue.

CNP Saw Many More Fraud Incidents Than CP
Figure 3 – CNP Saw Many More Fraud Incidents Than CP. Source: Pulse

Whenever a fraud claim happens, it brings an unpleasant experience to both the cardholder and the merchant in question. Hence, issuers may want to focus on ensuring that fraudulent transactions don’t even happen in the first place, especially with CNP.

Contactless and mobile wallet transactions are on the rise

According to the study, contactless is projected to be available on 64% of all debit cards by the end of 2021, up from 30% in 2020, and 94% by 2023. Even though contactless volume grew by 6 times in 2020, it still made up only 1.6% of total debit volume. As consumers become increasingly familiar with contactless and the feature is available on more cards, I expect the share of contactless volume to keep that impressive growth pace for at least a couple of years.

Meanwhile, mobile wallet transactions funded debit cards through three major wallets (Apple Pay, Samsung Pay & Google Pay) reached 2 billion in 2020, around 2.6% of the total debit volume, with the average ticket of $23, up 55% YoY. 57% of this mobile wallet volume were made in-app and the rest took place in stores. If we look at the competition between the aforementioned wallets, Apple Pay is the outstanding performer in every metric. In fact, Apple Pay had an overwhelming 92% share of all mobile wallet transactions using debit cards.

Starting 2022, Visa will put in place new interchange rules that are aimed to encourage more tokenized transactions such as mobile wallets. Hence, I expect that when we read the 2023 edition of this study or beyond, we’ll see a more prominent role of mobile wallet transactions in our society.

Contactless Volume Grew 6x But Still Made Up 1.6% of Debit Volume
Figure 4 – Contactless Volume Grew 6x But Still Made Up 1.6% of Debit Volume. Source: Pulse

Consumers’ Digital Wallets – Where Card Issuers Need To Be

In this post, I will touch upon digital wallets & checkouts as well as some market movements that make me believe that it will be strategically important for issuers to occupy consumers’ digital wallets.

Fast checkouts and payments are on the rise

Consumers love convenience. Instead of spending time to fill out addresses and credit card credentials, shoppers can finish the job with just a couple clicks. The same goes for in-store check-outs. It’s a far more convenient experience for consumers to hover the phone or a smart watch over a card reader than to drop whatever they are doing with their phone, reach for a wallet and pick out a card. Granted, even though they may not appeal to less tech-savvy shoppers, these fast checkouts, when absent, may be a deal breaker to the more technologically shrewd crowd. I mean, there has to be a reason why many stores accept the likes of Apple Pay or PayPal, despite losing a bit more revenue. Businesses know that by not enabling convenient payments and checkouts, they risk losing a whole lot more.

The more these payment applications are accepted at stores, the more they become useful to consumers and the more consumers they can acquire. The more consumers these wallets acquire, the more they can appeal to stores. The virtuous cycle keeps going. As they become popular, the mobile wallets become something like downtown Manhattan to card issuers. While it doesn’t guarantee success, being present in consumers’ phone and wallets suddenly becomes more critical. Furthermore, there are developments on the market that highlight the importance of this point, starting with Visa.

A new rule from Visa

Per JP Morgan:

In April 2022, Visa will introduce updates to existing domestic interchange programs with categories and rates for card not present Visa EMV token transactions. This includes both network tokenized transactions and digital wallets. With this update, a roughly 10 basis point reduction will apply for many card not present transactions that are Visa EMV tokenized in most segments.

In some cases, interchange rates for non-token transactions will go up, so while the net benefit may not reach 10 basis points, merchants that do not take advantage of the digital wallet incentive will undoubtedly be leaving money on the table. As ecommerce continues to grow, shifts like these to the overall cost of payments will have significant cost implications and influence a merchant’s product development roadmap.

The gist of this news is that Visa will allow merchants to keep more money from mobile wallet transactions but make them pay more whenever customers have to type in their information and card credentials. A few basis points may not sound much, but if your online sales is $1 million/year, the savings can be up to $10,000. Visa is the biggest network out there, accepted in virtually every store around the world. When the new rule comes into effect in 2022, its impact will be wide-ranging. I expect Mastercard to follow suit soon. The question for issuers now becomes: can they sit idly and let their rivals occupy the valuable real estate on our phones?

Apple Pay

Apple Pay is a proprietary mobile wallet by Apple that enables convenient payments by just a phone tap in stores or one click online. The feature is compatible on iPhone 6, all the models that came after and all Apple Watch. That should cover pretty much every iPhone user in the U.S, which makes up 60% of the mobile market domestically. Since its debut in 2014, Apple Pay has grown increasingly popular over the years. As of January 2021, Apple Pay is available in 90% of stores in the U.S and hundreds of websites, including those of major brands. According to the 2020 Debit Issuer report by Pulse, mobile wallet debit payments in the U.S in 2019 by Apple Pay, Samsung Pay and Google Pay totaled $1.3 billion, of which $1.1 billion came from Apple Pay. As of this writing, major cities such as Chicago, Los Angeles, New York City, Portland, San Francisco & Washington D.C already allow passengers to ride transit with Apple Pay. This kind of integration will only boost its popularity more in the future.

Figure 1 – Apply Pay facilitated most of the mobile payment transactions funded by debit in the U.S in 2019. Source: Pulse

Almost all issuers in the US enable integration of their cards into Apple Pay. American Express lets users who are instantly approved add their cards to Apple Pay immediately. In July 2021, it’s reported that Apple is working on a BNPL service for Apple Pay transactions. Historically, Apple offers a payment plan for its select products & services via Apple Card. Apple Pay Later will allow approved customers to make four interest-free payments due every two weeks or monthly payments at an undisclosed yet interest. Customers can connect their Apple Pay with any card that they want and it’s not required to own an Apple Card. This service will make this mobile wallet even more attractive to customers, though right now whether or when it goes to market remains to be seen.

PayPal

Many people know PayPal as the known P2P platform or that payment option that used to be on eBay. Over the years, PayPal has transformed itself into something much bigger. It now provides a lot of services for both consumers and merchants. No longer restricted to online purchases, consumers can now use PayPal online and in stores with services such as QR Code, mobile wallets, contactless, debit card, credit cards, PayPal Credit and PayPal in 4.

Figure 2 – Discover’s communication to ask customers to link accounts to PayPal

The brand and the scale of PayPal are not to be underestimated. In Q2 FY2021, PayPal processed $311 billion in transactions, almost twice as much as $170 billion in the same quarter two years ago. The company’s YoY growth in transaction volume topped 40% in the last two quarters despite operating at an incredible scale. If you take out eBay, the growth rate was never lower than 45% in 2021. Additionally, there were 403 million active accounts, including 76 million Venmo and 32 million merchant accounts. Venmo’s transaction volume doubled in the last 18 months from $29 billion in Q4 FY2019 to $58 billion in Q2 FY2021. The scale of PayPal is also reflected on how fast they roll out new features. PayPal in 4 was launched in August 2020. Since launch, the service generated $3.5 billion in transaction volume, of which $1.5 billion alone took place in the last three months. Meanwhile, the number of merchants that enabled payments by QR codes leaped from 500,000 in Q3 FY2020 to 1.3 million in the most recent quarter.

On the earning call, the CEO of PayPal highlighted its imminent push into the in-store space.

Clearly, on the branded side, we think we add a tremendous amount of value, things that John talked about, buyer and seller protection, Buy Now, Pay Later at no incremental cost, fraud protection, highest checkout conversion, etc. But we took down rates for basic full-stack processing. That also was reduced somewhat substantially from the 2.9%, plus $0.30 to 2.59%, plus $0.49. And that is going to enable us to aggressively compete for all of the payment processing of the merchants that do business with us.

And you’ve heard us say time and time again, David, that we were going to move into the in-store space. We’re going to move so aggressively in there. We rolled out Zettle in the U.S., is a really beautiful full package. It doesn’t just include card reader but inventory management, sales reads out and allows a merchant to seamlessly load inventory in both their online and in-store locations and then, across multiple channels as well.

And so we’re, obviously, gonna be very aggressive on moving into in-store, and it’s always been part of our strategy. And by the way, if a small merchant does all of their business with us, they can actually see their overall costs come down. And we wanna encourage them to do all of their business with us because we are a trusted platform. They do turn to us, and we price, we think, the right way.

Source: Fool.com

If PayPal successfully becomes one of the de facto checkout methods in stores, given it’s already a popular checkout option online, how would smart issuers ignore the need to get into consumers’ PayPal wallet?

Shop Pay

Shop Pay is the native checkout feature by Shopify. Shopify is an eCommerce platform from Canada. It provides businesses with the tools necessary to build a customized online presence. When merchants list their products on Amazon or Walmart, they just rent a space and have little flexibility for their own branding. Plus, these merchants have to pay numerous fees to the likes of Amazon and Walmart. With Shopify, they pay a monthly subscription and a usage-based fee for some paid services. But stores can keep their own branding and gain more control over their destiny.

Shop Pay works similarly to Apple Pay, PayPal or Visa SRC. Once a credential is stored, customers can use Shop Pay across all stores powered by Shopify. In February 2021, Shopify expanded their checkout feature for the first time to all Shopify-powered stores on Facebook and Instagram. The collaboration was successful that a few months later, they decided to roll out Shop Pay to all merchants on Facebook and Google. This move can bear significant ramifications. Facebook owns the most popular social networks in the world like Facebook, Instagram, WhatsApp and Messenger. Their access to billions of consumers is what retailers want. Google has the dominant market share in search and as a result, a unique access to consumers globally. As these tech giants make a push into eCommerce, Shop Pay will benefit from this partnership and grow even more.

Figure 3 – Shopify’s GMV in Q2 2021 was higher than that of the entire year of 2018. Source: Shopify

Between its launch in 2017 and the end of 2020, Shop Pay facilitated $20 billion in transactions. The cumulative figure increased to $24 billion as of Q1 FY2021 and $30 billion as of Q2 FY2021. As you can see, Shop Pay is growing increasingly fast. The growth of Shop Pay coincides with the growth of Shopify. In the last quarter, Shopify processed more volume than it did in the entire year of 2018. As this company continues to expand and by extension, so does Shop Pay, how long can issuers be absent from this checkout option?

In summary

Engaged customers will add their favorite card to their mobile wallets. The challenge is for issuers that don’t occupy the top-of-wallet position yet. Customers can still rotate cards and choose a certain one at the time of purchase. Hence, being in a customer’s wallet doesn’t mean a card will be used often. Card issuers still need to offer values and work hard to increase engagement. But as the saying goes, you have to be in it to win it.

Let’s talk Paypal. No longer merely a P2P player

The story of Paypal started in 1998 when Max Levchin, Peter Thiel and Luke Nosek founded Confinity, a digital wallet company. They later merged Confinity with X.com, launched by Elon Musk, and altogether rebranded the new entity as Paypal. In 2002, the company went public under the ticket $PYPL. Later in the same year oof its IPO, it was acquired by eBay and became the prominent payment option on the famous marketplace. In 2015, Paypal left the eBay family to become a separate and independent entity. Six years later, it is now one of the most trusted brands in the world, available in more than 200 countries and valued at almost $300 billion.

At the core, Paypal provides payment and financial services to both consumers and merchants. Originally, it used to be one of the primary methods of person-to-person (P2P) transactions. Over the years, Paypal has transformed itself into a more expansive platform. Consumers can now use Paypal to send and receive money from others as well as to pay merchants, whether the transactions are online or in stores with debit cards, credit cards, tap to pay and QR Codes. On the merchant side, Paypal offers a host of solutions, including payment processing, marketing tools and financing options.

Paypal's breadth of services
Figure 1 – Paypal’s services. Source: Paypal

As a two-sided platform, Paypal needs one side to feed the other. From the consumer perspective, they only find Paypal useful when they have friends and families on Paypal network. Additionally, Paypal must be accepted at various merchants, whether transactions take place in physical stores or on websites. Otherwise, what would be the point of having a Paypal account? From the merchant perspective, Paypal’s value propositions lie in their payment solution and the brand name as well as trust cultivated with consumers. If consumers didn’t trust or use Paypal, there would be plenty of other alternatives. But that’s also one of their three moats. It’s super hard to be a two-sided platform because of the chicken-and-egg problem. Not only did Paypal have to solve that problem between consumers and merchants, but they also had to deal with it within the consumer space.

Another moat of Paypal is that the company has cultivated trust in consumers and merchants alike with its track record of security. Even though security breaches are almost inevitable to any company, so far Paypal hasn’t recorded too many incidents. When it comes to handling people’s money, security should be at the top of any company’s agenda. I mean, anyone can boast that they can exercise two hours in a row. I don’t doubt it. But it’s a completely different challenge to exercise two hours a day for 30 days in a row, let alone for years. To replicate such a track record, a competitor needs to invest in security and more importantly, it needs time. No matter what a newcomer says about its own security, only time can seed the trust in the constituents of its network. Unfortunately, time isn’t something that human brains or money can buy. And while a newcomer or existing player builds up its track record, Paypal is not likely to stand still. Just look at their M&A activities in the last few years: Venmo & Braintree (2013), Xoom (2015), iZettle (2018), Honey (2019), GoPay & Happy Returns (2021).

Finally, Paypal is operating at an enormous scale. In Q1 FY2021, it processed $285 billion in transactions, growing at 49% YoY. That annualizes to more than $1 trillion. As you may know, scale is the magic in business. Paypal’s gigantic scale should give the company a cost advantage over competitors. Plus, the breadth of Paypal offerings poses a daunting challenge to anyone wishing to match them. Just look at Figure 1 to see how many services are available, not to mention the acquisition of Happy Returns. It’s hard to spread resources and make investments on multiple fronts when you are on the back foot in terms of unit costs. Just to give you an example of what the scale of Paypal’s existing active account base and its brand name can do, let’s take a look at the rollout of Buy Now Pay Later and QR Code. Paypal introduced its Buy Now Pay Later only in August 2020. As of Q1 2021, its Pay in 4 already had over $2 billion in TPV globally, of which $1 billion came from the US. Pay in 4 also had 5 million unique customers. In addition to its popularity and reach, Paypal offers the service to merchants without charge. Normally, merchants have to pay BNPL providers several times the normal interchange, but Paypal is willing to subsidize merchants to gain market share. Also, the company enabled pay by QR Code some time in the latter half of 2020, but it already amassed 1 million merchants as of Q1 2021 that used the service, up from 500,000 two quarters prior.

How Paypal benefits merchants
Figure 2 – Value propositions of Paypal to merchants. Source: Paypal

How does Paypal make money?

We generate revenues from merchants primarily by charging fees for completing their payment transactions and other payment-related services.

We generate revenue from consumers on fees charged for foreign currency conversion, optional instant transfers from their PayPal or Venmo account to their debit card or bank account, interest and fees from our PayPal Credit products, and other miscellaneous fees.

Source: Paypal’s latest Annual Report

In short, Paypal charges merchants on every processed transaction and for other additional services. On the consumer side, P2P transactions don’t yield much revenue, but if consumers want to have instant deposits or have an outstanding unpaid balance on their credit cards with Paypal or Venmo, then the company earns additional fees and interest on the balance.

Take-rates which indicate what Paypal gets in revenue over the transaction volume depend on the kinds of transactions. Normally, bill payments and P2P transactions have low take-rates. Transactions funded using debit or credit cards are more expensive to process than those funded using bank accounts or balance within Paypal or Venmo. Commercial transactions such as those on eBay or cross-border transactions that require a foreign exchange are more lucrative. Obviously, Paypal would love to maximize revenue and profits, but there is necessarily a balancing act to be had here. Although bill payments and P2P have a low yield, they are sticky. They are what keeps users engaged and in the network. Payments is a highly contested industry. Any transactions processed by legacy banks, other providers such as Square or Apple Pay and fintechs are transactions that Paypal loses. Hence, I think for the time being, it’s better for the company’s future that they are prioritizing the growth of the active account base and engagement.

Venmo and Paypal TPV
Figure 3 – Paypal and Venmo TPV
Paypal's active account base
Figure 4 – Paypal’s active account base
Paypal and Venmo YoY Growth in TPV
Figure 5 – Paypal & Venmo YoY Growth in TPV
Transactions per active accounts from Paypal
Figure 6 – Transactions Per Account

In short, I am bullish on Paypal. The company has a brand name known and trusted in many countries around the globe. It has the expertise after spending more than two decades in the industry and the ability to transform itself into a more expansive and competitive entity. It has a nice track record of acquiring other businesses to add needed capabilities. Currently, Paypal is the only Western company with 100% ownership of a Chinese payments company after it acquired 100% stake in GoPay. Additionally, it announced the acquisition of Happy Returns with the aim of offering merchants as well as shoppers convenient return services. As payments are pretty fragmented, I believe Paypal will not have any trouble from regulators with regard to future M&A. Yes, competition is plenty and stiff, but as you may already see at this point, there are reasons to like Paypal and what they are doing.

Disclosure: I have a position on Paypal.

Look for books to read? Check out those I have read lately

The Anatomy of The Swipe: Making Money Move

We are so accustomed to having quick card-based transactions that if a transaction takes more than a couple of seconds, it will be a terrible customer experience. What many folks don’t know is that there are a lot of things that happen behind every transaction. It involves several parties, including but not limited to a cardholder, an issuing bank, an issuer processor, a network, a merchant processor, a merchant bank and a merchant. During the brief couple of seconds when a cardholder waits at a cashier, information goes from a card reader all the way back to at least an issuer processor through a card network (Visa, Mastercard) and a merchant processor, and back to the card reader. But it’s not finished yet. The process continues at least a couple of days after the transaction when the involved parties go through the clearing and settlement steps.

The payment world is so complex that there are startups that decouple individual steps of the whole process and carve out a niche market for themselves by specializing in such steps and improved efficiency. Take neobanks for example. They offer checking accounts with virtually no fees because they aren’t regulated and can operate without fixed costs such as branches.

I tried in the past to learn about payment systems, but not until this book did I find a reliable source that can break down abstract concepts in a digestible manner. If you are interested in payments or fintech, do yourself a favor and read this book

The reason why you can take money out of just about any ATM is because of the Durbin Amendment and its requirement that every debit card must have a secondary unaffiliated network. This law was put in to give consumers more choice in finding an ATM network. For example, if you have a debit card from Visa and the ATM doesn’t support Visa’s ATM networks, then it can run on Mastercard’s ATM network, Cirrus.

The term “Clearing” is used primarily by Issuers, but can also be referred to as “Capture” by Merchant Acquirers. Clearing happens toward the end of the day for most Merchants and will factor in tips, transaction reversals, and returns. This is basically the Merchant confirming these transactions are valid and that these funds are ready to be moved or “settled.”

Settlement is the actual movement of money from the cardholder’s bank account, the Issuing Bank, to the Merchant’s bank account, the Acquiring Bank. This movement of money typically happens via Fedwire as instructed by the payment networks.

Key term: 3D Secure

This is a standard for offering cardholders one more layer of security for online transactions. When card numbers are entered into a website to pay for something, 3D Secure will require the cardholder to enter one more form of authentication, such as a one-time-use PIN or passcode, similar to how two-factor authentication works for websites. More recently, the card networks are requiring Merchants and card Issuers to roll out a service called 3D Secure. The technology is standard in Europe but not yet in the US.

More recently, the card networks are requiring Merchants and card Issuers to roll out a service called 3D Secure. The technology is standard in Europe but not yet in the US.

The main reason is that these new “neo-banks” aren’t actually banks but rather tech companies that partner with regional banks such as Sutton Bank, Bancorp, or Meta Bank. These regional banks have less than $10 billion in assets and are able to charge a higher Interchange rate because they are considered exempt from the Interchange rules set forth in the Durbin Amendment and are considered “unregulated.”

TAPE SUCKS: Inside Data Domain, A Silicon Valley Growth Story

This book was written by Frank Slootman, former CEO of Data Domain. Frank took the company public and was the CEO when it was sold to EMC. He then went on to take the rein at ServiceNow and is currently assuming the top job at Snowflake. This book is his account of his time as CEO at Data Domain. It is a pretty short book, but it includes an honest and crisp account of how he scaled the company and dealt with startup issues. I like this book because it isn’t lengthy. I think it’s because of his direct nature as a Dutchman. Frank wrote about the lessons he learned along the way with little “fat” or lengthy unrelated anecdotes. He was straight to the point. His lessons outlined in the book should be helpful to aspirational entrepreneurs and CEOs.

Snowflake is expected to go public next week. If you are interested in that company and its CEO, you should give it a read.

My morning routine

The author interviewed a plethora of celebrities and successful folks to learn about their productivity hacks in the morning. Humans are creatures of habits. We all have our habits and routines and these successful men and women aren’t any exception. I don’t think what this book offers is unique in a sense that you can find these hacks on Google at any time. What it does is perhaps to catalogue all these hacks in one place so that you can choose to look at the routines of the folks you like. Plus, if you already studied about productivity tips before, it’s very likely you’d know what to do in general. What is missing is just our determination and discipline.

With that being said, if you are new to the productivity improvement game, this book may be of value. However, it’s pretty pricey compared to the two books I listed above, given the value and satisfaction in return. I’d try to Google the topic before I book this book

7 Powers: The Foundations of Business Strategy

This is a classic book about business strategy. It covers 7 aspects of a successful strategy framework developed by Hamilton Helmer. The aspects include Economies of Scale, Network Effect, Counter Positioning, Switching Costs, Branding, Cornered Resource and Process Power. I think it’s a valuable read to anyone who is interested in analyzing businesses and companies. Of course, the book would be more valuable to newcomers than those who already studied strategy before. For instance, if you are familiar with the concept of Network Effect, Porter’s Five Forces and Switching Costs, this book will serve more as a reminder than a revelation. Nonetheless, it costs only $9 for a Kindle version from which you can take great notes on business strategy.

The Motley Fool Investment Guide

Even though this book costs $15 for a Kindle version, I actually think if you are new to investing and you want to grow your net worth, you should start reading this book. This book covers very important topics of investing. It talks about why you should invest in or avoid mutual funds. It also discusses the appeal of blue chips and small-cap stocks. If you haven’t learned much about the main financial statements (income statement, cash flow or balance sheet), the book provides an overview of these statements and what they mean in general. In my personal experience, although news outlets have coverage of companies’ financials, as an investor, you should do your own homework and practice reading reports as well as financial statements. Additionally, this book touches upon options such as shorting and longing a stock. They aren’t my preferences, but it doesn’t hurt to know what they are and what they do. Of course, the book has to talk about the power of compound interest, which is why we need to invest early and be patient.

I really recommend this book if you want to venture into investment.