The industry continues to see a dramatic uptick in demand from merchants for Omnichannel capabilities, specifically from SMBs with some checks suggesting a pull-forward of demand by 2-3 years. We see GPN as well-positioned to benefit given that over the past several years it has built what we believe to be an impressive stack of eComm/Omni offerings, and our checks suggest that merchants in the U.S. and globally are adopting GPN’s offerings at an accelerated pace. We see several factors of differentiation that could drive revenues and position GPN as a structurally stronger company on the other side of this pandemic.
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Last night, reports surfaced that PayPal has made a strategic investment in Indonesian ride-hailing app Gojek. While financial details are undisclosed, by integrating PayPal’s digital payment capabilities, Gojek should be able to enable digital payments for millions of SMB and micro-merchants across Southeast Asia and help large enterprises strengthen their existing digital payment infrastructures. Furthermore, Gojek has ~170mm active users, and over time these users may gain access to PayPal’s +25mm global merchants. This announcement coincides with a similar investment by Facebook into Gojek, in which the Company plans to integrate WhatsApp into the platform.
Following a recent report from Bloomberg that indicates Western Union may have made an offer to acquire MoneyGram, we weigh the prospects of a potential deal and resulting earnings accretion . We also note a Company update Tuesday morning (6/2) on C2C transaction trends through April and May which rebounded faster than the World Bank’s forecast would suggest.
Remitly provides digital money transfer services across over 700 corridors and allows users to select from a range of disbursement options, including cash pickup, instant bank and mobile wallet deposit, and others depending on the region. The Company is also in the early innings of building out a suite of other financial services, which so far includes Passbook, a digital bank account designed for migrants and underbanked.
After the market close today V updated volume and transaction trends through May 31st. May trends improved on a weekly basis through the end of the month. Total U.S. payments volume growth accelerated to nearly flat in the last week of May vs. 18% decline in April as debit volume was up ~20% (last week of May), underscoring V’s high exposure to non-discretionary debit. U.S. credit volumes remain in negative territory at levels of 20% declines in May. Transaction growth also accelerated from 24% decline in April to -10% in 2H of May relatively in-line with MA’s 12% decline in the first week of May. Cross-border declines of low-30% in 2H of May compares to -43% decline at MA in first week of May.
Following our recently published note where we looked at fraud trends around card-not-present, we take a closer look at MA’s initiatives and offerings surrounding fraud and cybersecurity. While we recognize questions around cross-border travel implications on MA (and V) revenue may persist, we continue to believe the networks should benefit from capabilities to provide a wide set of services including those around cyber products, stemming from not just risk assessment fees on a transactional basis but also from additional value-added services. Overall, we see incremental services (such as security/fraud management, analytics, and others) combined with growth in contactless transactions (see our recent note on contactless transactions here), incremental digital transactions, and higher use cases of alternative payments types (G2C, B2B), potentially offsetting medium headwinds around travel.
BlueSnap helps enable merchants with eComm, B2B, and increasingly omnichannel capabilities across multiple currencies/cross-border, including partnerships with a number of acquirers/banks (such as BAC and FISV). BlueSnap is focused on the middle market, and while it will often see Stripe, Braintree, Adyen and others in RFPs, BlueSnap competes on differentiation in cross-border abilities, auth rates, services, onboarding, partnerships, etc. See below and pages 2-3 for takeaway from BlueSnap as well as key (eComm related) points from recent comments from PYPL management.
DXC reported F4Q results after yesterday’s close (5/28/20), highlighted by revenues between our and the Street’s estimates and an EPS beat. Not surprisingly, the Company did not provide FY21 guidance given uncertainty in the demand market, however management commentary suggested an 8-10% sequential revenue decline in F1Q21, as well as $1B in estimated revenue runoff throughout FY21(with a pronounced impact in Q1) due to suboptimal client delivery over the past 12-18 months. Management also expects to realize $550mm in cost savings in FY21, primarily in the latter 3 quarters, via headcount and real estate optimization among other cost initiatives.
DXC reported F4Q results after today’s close (5/27/20), highlighted by revenues below the Street but ahead of our expectations, and adj. EPS ahead of Street estimates, which benefitted in part from goodwill adjustments. DXC did not introduce FY21 guidance, following the trend of many IT Services companies reporting this quarter, though F1Q guidance of 8-10% sequential revenue decleration is roughly in-line with our model. The Company noted $1B in projected contract run-offs in FY21 due to price downs and terminations in FY20, which will disproportionately impact 1H21. We also note the drawdown of additional credit, bringing DXC’s cash and debt balances to $5.5B and $10.2B, respectively, as of April 30, and a suspension of the $0.21/sh quarterly dividend while DXC evaluates future trends and divestiture plans. Total reported revenues of $4.82B were down 8.8% Y/Y on a reported basis and down 6.9% CC, between our $4.78B and the Street’s $4.87B.
Last week, PYPL rolled its QR Code solution into 28 markets, which allows sellers to display their unique code at the physical POS and accept payment from either PayPal or Venmo wallets. Through July 31st PayPal is waiving all transaction fees on QR code payments, and will charge 1.90% +10c afterwards.
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