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Despite losses doubling in the most recent quarter, Klarna is predicting profitability next year, noting that it has taken on the painful task of letting go a tenth of its workforce while also recognising the need to diversify from pure-play BNPL in a rising interest-rate environment.
The latter shift in strategy has led the Stockholm-headquartered company to leverage the almost half-a-million merchants and retailers with which it has relationships to identify and share the proceeds of new revenue opportunities. Consequently, notes the pay-later champion, "marketing revenue is our fastest-growing revenue stream, growing 163 percent" year on year (YoY). Interestingly, given TikTok's extraordinary success using the technique in its domestic market, shoppable video is one of Klarna's many new product launches highlighted in its results report. However, it costs money to set up and maintain income streams: an examination of Klarna's numbers by Argus Advisory Research reveals that the biggest barrier to profitability may well be general administrative expenses.
At 14 percent, year-over-year e-commerce card spend slightly outgrew its offline equivalent (which hit 12 percent), according to Mastercard's report on Black-Friday transactions this year. "With holiday promotions kicking off long before the Thanksgiving weekend, consumers have been shopping strategically for the season's best deals," commented Michelle Meyer, North America chief economist at the Mastercard Economics Institute.
That savings-sensitive approach, increasingly pursued by Americans under pressure from rising inflation and interest rates, favours the online channel as it is easier to compare and time purchases on the internet than at brick-and-mortar stores. The more recent retail innovation of Cyber Monday consequently continues to gain ground on its older rival, this year reaching its most valuable sales total ever reports Reuters.
Meanwhile, Apple Pay's "extremely rapid pace" for new user uptake ( YoY by 52 percent globally and 59 percent domestically ), noted by a Deutsche analyst on Monday, has been making an impression in the financial press this week. In contrast, PayPal has reportedly seen a fall in growth on these measures of eight and four percent, respectively.
"Big Tech giants continue to delve into payments and consumer-facing financial services, but with mixed success," notes a new report from Argus Advisory Research on the world's most valuable credit cards market: the United States. Having rebounded dramatically after the Covid period, AAR researchers expect, compared to 2020, a 50 percent growth in spending by credit card, which continues to be America's favourite payment instrument despite increasing competition from debit cards and digital payments.
In an Insights article on the study, it is revealed that the growth rate for credit-card spending remained comfortably above the 20 percent mark last year and, on an estimated basis, this year also. Although spending on debit cards continues to grow, it is now at a markedly lower rate: around seven percent. With almost nine in ten Americans now owning a smartphone, usage of digital-payment options is growing. Still, the credit card nonetheless retains its indispensable status for Americans, especially in an environment where rewards have seldom been more attractive.
Other stories of interest this week...
Canada: Big names back new fintech association
Canada: HSBC continues disposals drive with sale to RBC
UK: Barclays fined $10.3m for breaking interchange fee rule
UK: Court dismisses Mastercard appeal against $17bn class action
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The Weekly News Digest from Argus Advisory Research highlights significant developments in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value often missing from the rolling news cycle.
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