FinTech Daily: PayPal Shares Up 7% After Better-Than-Expected Earnings; Spotify Acquires Mediachain
PayPal Shares Up 7% After Better-Than-Expected Earnings
PayPal, the payments company, posted first-quarter earnings results after the bell on Wednesday. After surpassing analyst estimates with an adjusted 44 cents per share, compared to the 41 cents that many were predicting, shares rose 7 percent in initial after-hours trading. Net income was $384 million, up 5 percent from last year. Revenue was also slightly better than expected, coming in at $2.975 billion, when compared to the $2.94 billion that analysts surveyed by FactSet were expecting. That’s growth of 17 percent year-over-year. PayPal also announced a $5 billion share repurchase program. “With another quarter of strong financial results, we continue to deliver on our vision to democratize financial services for our consumers and drive the global transition from cash to digital payments,” said Dan Schulman, president and CEO of PayPal, in a statement. Some investors had been wondering what effect the recent credit card partnerships will have on margins. As more of their customers shift to credit cards, it will reduce margins. But the credit card accessibility can also add new customers. PayPal says they added 6 million new accounts in the quarter, bringing the total to 203 million active users. The company owns Braintree, which processes the mobile payments for Uber, Airbnb, Facebook Messenger and other big clients. This means that PayPal takes a cut of these transactions. PayPal also owns Venmo, the popular peer-to-peer payments platform. They have increasingly been monetizing this product through business partnerships and the division brought in $6.8 billion in total payments volume, up more than double from the same period last year. Total payments volume for the company was $99 billion, in line with analyst expectations. This is up 23 percent from last year or 25 percent, adjusting for changes in currency. PayPal separated from eBay in July 2015, and is the larger of the two companies with a market cap of almost $54 billion. Shares are up almost 13 percent this year, and closed Wednesday at $44.41.
Spotify Acquires Mediachain to Develop Blockchain Technology That Matches Royalties With Rightsholders
Spotify has acquired Mediachain, the New York-based startup behind an open source peer-to-peer database and protocol for registering, identifying, and tracking creative works across the internet. Terms of the deal were not disclosed. Launched in 2016 with seed backing from Andreessen Horowitz and Union Square Ventures, Mediachain has been working toward using blockchain technology to entrench timestamps and data regarding ownership within a specific media asset. It’s all about enabling creators and rightsholders to prove they are the owner of a piece of work — in Spotify’s case, music — and receive payment. The problem for legitimate companies, such as Spotify, is that they may try to pay artists and publishers but often don’t know who to pay. This is perhaps more of a problem with smaller artists or indie labels. Just last month, Spotify reached a $30 million settlement with a publishing group over unpaid royalties and agreed to establish best practices to make a “reasonable effort” to match all music streams with rightsholders. "A music blockchain would be a single place to publish all information about who made what song, without having to trust a third-party organization,” Mediachain cofounder Jesse Walden has said previously. Now Spotify is bringing Brooklyn-based Mediachain to work in its New York office to “help further Spotify’s journey toward a more fair, transparent, and rewarding music industry for creators and rights owners,” according to a press release.
Cashless Society Getting Closer, Survey Finds
More than a third of Europeans and Americans would be happy to go without cash and rely on electronic forms of payment if they could, and at least 20 percent already pretty much do so, a study showed on Wednesday. The study, which was conducted in 13 European countries, the United States and Australia, also found that in many places where cash is most used, people are among the keenest to ditch it. Overall, 34 percent of respondents in Europe and 38 percent in the United States said they would be willing to go cash-free, according to the survey conducted by Ipsos for the ING bank website eZonomics. Twenty-one percent and 34 percent in Europe and the United States, respectively, said they already rarely use cash. The trend was also clear. More than half of the European respondents said they had used less cash in the past 12 months than previously and 78 percent said they expected to use it even less over the coming 12 months. Ian Bright, managing director of group research for ING wholesale banking, said he did not believe people would quit cash entirely, but the direction was obvious. "More and more people will end up with a situation where they can quite comfortably get by for two days, three days, four days, even a week, without ever using cash," he told Reuters Television. Payment systems such as contactless cards and mobile-phone digital wallets have become so prevalent the issue has become political in some countries. Cash-loving Germans, for example, have been concerned that a move by the European Central Bank to phase out the 500 euro note by the end of next year is the start of a slippery slope. Germany is one of the countries that uses cash the most. The ING survey showed only 10 percent of Germans saying they rarely use cash, compared, for example, with 33 percent and 35 percent, respectively, in neighbors Poland and France. The survey also showed that, in general, countries where cash is much in use were most likely to want to go cashless. Only 19 percent of Italians said they rarely used cash but 41 percent said they would be willing to go cash. There was a similar trend in Turkey, Romania, the Czech Republic, Spain and even Germany.