Snippings

BCG lays out why banks are in trouble and losing their relevance and position as apex financial predators. They are losing their share of total societal financial assets to non-banks who are out-competing them in lending. This is no longer banks offloading risky assets but a full-fledged assault by fintechs and techfins.

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For Amex, Delta’s SkyMiles members represent a profitable customer segment. The firm currently has around 7.5 million people holding its co-branded card, representing 30% of SkyMiles’ active members. And they typically steer more of the spend to that card. According to Delta’s CEO, “co-brand spend on the American Express Card is approaching 1% of total US GDP.”

American Express pays for the rewards out of merchant fees. Over the past 12 months it has paid out $15.2 billion of rewards (in addition to what it pays over to Delta and other partners) but has earned $33.0 billion in so-called discount revenue and $58.9 billion in total revenue, once interest income and card and other fees are included.

The only problem is that competition has been driving up the rate at which card companies pay rewards. Over the last 12 months, American Express has paid out 1.07% of purchase volume in rewards, up from 0.80% ten years ago. Other card issuers have seen similar reward inflation. Capital One paid out 1.29% of purchase volume in 2022, up from 0.80% in 2013. And Discover paid out 1.43%, up from 0.94%.

From: The Points Guy – by Marc Rubinstein – Net Interest.

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At around the same time, another innovation opened up airline programs to a broader market than just frequent flyers. In 1987, American partnered with Citi to launch a co-branded credit card. Now, consumers could collect points simply by spending on their card, whether that was on American Airlines flights or not.

From: The Points Guy – by Marc Rubinstein – Net Interest.

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Today, the largest programs have over 100 million members each. The three big ones – American’s AAdvantage, Delta’s SkyMiles and United’s MileagePlus – generated $15.6 billion of revenue in 2022, equivalent to 11% of their parent companies’ total revenue. Because it is typically a more stable income stream, loyalty revenue helps insulate airlines from fluctuations in the business cycle and can be used to secure cheaper funding. During the pandemic, all three used their programs as collateral to issue bonds at more favorable rates than the airlines themselves would have received. 

The industry trade group representing US carriers estimates that 63% of total frequent flyer points earned in 2022 by consumers were generated through credit card use.

 

In my scheme, operator Avios Group has disclosed that 80% of billed revenue comes from external partners. To raise cash in the grip of the pandemic in 2020, it pre-sold a bunch of points to American Express for £750 million. 

 

The consumer value of points varies widely according to how they are used, but The Points Guy puts the value of Avios at around 1.2 pence per point, so the benefit to the consumer is clear

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Facial recognition for cats — Carelogy, a Japan-based startup developing an app that uses AI to detect a cat’s pain based on its facial expression, raises an undisclosed amount of seed funding from Quantum Leap Ventures

From: Big Ring in the Sky – by Brandon Gorrell and Owen Lewis.

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You might think so, based on early order trends for the $3,499 Vision Pro headset. Apple AAPL, +1.55% opened up online preorders for the mixed-reality device earlier Friday, and they seem to be flying off virtual shelves, based on quoted delivery times.

From: Apple’s Vision Pro headset is selling out — but what does that really mean? – MarketWatch.

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Then there’s Amsterdam-based agency LaLaLand.ai, which promises to “create models in five minutes” to help brands become more ‘inclusive’: “Present your garments on a diverse range of models. Position yourself as an inclusive brand, increase your engagement, and drive more sales.”

From: I had my face stolen by AI | Dazed.

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As examples, Fierman points to Nobitex, the largest cryptocurrency exchange operating in the sanctioned country of Iran, as well as Garantex, a notorious exchange based in Russia that has been specifically sanctioned for its widespread criminal use. Stablecoin usage on Nobitex outstrips bitcoin by a 9:1 ratio, and on Garantex by a 5:1 ratio, Chainalysis found. That’s a stark difference from the roughly 1:1 ratio between stablecoins and bitcoins on a few nonsanctioned mainstream exchanges that Chainalysis checked for comparison.

From: ‘Stablecoins’ Enabled $40 Billion in Crypto Crime Since 2022 | WIRED.

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BRUSSELS—Apple AAPL 0.60%increase; green up pointing triangle has agreed to let third-party mobile wallet and payment services in Europe use the technology behind its Apple Pay app in a move to allay competition concerns from European regulators.

The U.S. tech giant said Friday that it would allow other companies’ apps to make contactless payments on iPhones and other devices that use its iOS operating system for free, without the need to use Apple Pay or Apple Wallet.

From: Apple Offers to Open Mobile Payments to Third Parties Amid EU Antitrust Case – WSJ.

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If Apple didn’t do this, they would run the risk of being bypassed. Look at what has happened in the messaging sector.

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In an internal email on April, 8 2013, Apple senior vice president Craig Federighi wrote, “I am concerned the imessage on android would simply serve to remove an obstacle to iPhone families giving their kids Android phones.” Allowing Apple Messages on competing operating systems, in other words, would threaten the iPhone business.

More than ten years later, Apple remains reticent to make Messages interoperable, and this has opened the door for Meta apps like WhatsApp

From: Tim Cook’s Apple Has Been Meta’s Best Friend. Completely By Accident..

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Tim Cook handed Meta a gift by insisting that Apple’s Messages synced poorly with Android.

From: WhatsApp is Finally Starting to Dominate in the United States. Here’s Why..

I have to say this is true in our family of mixed Apple and Android users: we now have a family WhatsApp group (as it seems everyone does) and we use it all the time.

If Apple refused to give any access to the wallet via NFC indefinitely, then downstream there would be the potential for the retailers and the banks

then in time the retailers and the banks would eventually 

Meanwhile in the US, the Consumer Financial Protection Bureau (CFPB) published their report into “tap to pay”, which found that financial services providers can offer applications to facilitate POS payments but “cannot rely on NFC technology on mobile devices using Apple’s iOS operating system”. This means that competition is limited and that widely used payment apps such as PayPal, Venmo, and Cash App are not available via convenient contactless connectivity and that consumers must use Apple’s proprietary payment service, Apple Pay.

Overall, roughly three in four of 130 million iPhone users have activated Apple Pay, with nearly 56 million U.S. consumers making an in-store payment using Apple Pay in April 2023, accounting for nearly half of iOS users. And in 2021, there were an estimated 25 million Google Pay users, which is forecast to grow by another 10 million users by 2025. Visa recently reported that 1 in 3 Americans use tap-to-pay for purchases, seven times the use from just three years ago. Mastercard reported that contactless payments globally account for over 60 percent of in-person transactions.

Anil John, Technical Director of Silicon Valley Innovation Program at the U.S. Department of Homeland Security, commented on that report saying that if you substitute “payments” with “identity” in much of the report, “it gives you a preview and the playbook” which made me reflect on my tongue-in-cheek reminiscences of Money20/20 in Las Vegas back in 2014 when said through the voice of an alter ego “I don’t fall for your ‘easy payment’ waffle. I know it’s just a trojan horse for your wallet play: loyalty, coupons and — if you have your dastardly way — identity.”

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In an internal email on April, 8 2013, Apple senior vice president Craig Federighi wrote, “I am concerned the imessage on android would simply serve to remove an obstacle to iPhone families giving their kids Android phones.” Allowing Apple Messages on competing operating systems, in other words, would threaten the iPhone business.

More than ten years later, Apple remains reticent to make Messages interoperable, and this has opened the door for Meta apps like WhatsApp

From: Tim Cook’s Apple Has Been Meta’s Best Friend. Completely By Accident..

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When Tim Cook introduced Apple’s Vision Pro, he turned mixed reality into a category, not just a theory. Apple’s glossy marketing showed a new vision for the technology — one that prioritized mixed reality over virtual reality — and lifted Meta’s efforts.

From: Tim Cook’s Apple Has Been Meta’s Best Friend. Completely By Accident..

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