Strong Jobs Beat, GS Investor Day, Mastercard vs Visa

By Tito Donis

February 9, 2020

Greetings,

In macro news, the US Economy added 225,000 jobs in January, beating expectations of 158,000 jobs, and brought the unemployment rate to 3.6%. Wages increased by 3.1% from a year earlier.

At the same time, the inverted yield curve returned to the scene after quietly exiting this past October.

Source: PeerIQ, The Daily Shot

Goldman Sachs Hosted its First Investor Day

Last week, Goldman Sachs hosted Investor Day and offered a greater perspective into Marcus.

Exec. Eric Lane stated, “We aspire to be the leading digital consumer bank…We’re starting with loans, we added savings and cards, and we’re working to build out the balance of the digital products suite, including wealth and checking.”

Marcus seeks to compete against digital challenger banks as well as leading online brokerage/banking firms such as Charles Schwab.

Goldman aims to double its consumer deposits to $125 billion over the next five years. The Investor Day presentation shared that Marcus had achieved $60 billion in deposits, 5 million customers, and $7 billion in loan/card balances at the end of 2019.

The goal is to generate between $700 to $900 million in pretax income; however, today Marcus' results show a negative contribution margin and will for several years.

Below is a choice chart:

Source: Goldman Sachs, PeerIQ

We recommend Matt Levine at Bloomberg’s tongue-in-cheek editorial called, “Goldman Has Some Boring Plans.” Check it out.

Mastercard Prefers to Partner, Visa Prefers to Acquire?
Mastercard is taking a different approach to Visa’s acquisitive approach by aggressively partnering with FinTechs.

Mastercard has launched card programs for FinTechs like Brex Inc., Revolut Technologies Inc., and TransferWise Inc., and has unveiled programs designed to make it easier for startups to join MasterCard's network.
These FinTech partnerships have helped boost customer spending on the firm’s cards to $1.28 trillion in the quarter, up 11% from a year earlier and in line with analysts’ estimates.
“The solution that Mastercard brings is more holistic than just saying, ‘we’ll switch the transaction for you,’” CFO, Sachin Mehra said in a telephone interview. “We say, ‘All right, FinTech ABC, what are your objectives? What are you trying to achieve? You’re trying to go cross border or you’re trying to target travelers? Here, let us help you with data analytics and fraud tools.’”

The efforts are paying off. SoFi announced it is dumping Visa and made Mastercard its exclusive partner for credit and debit cards.

The switch to Mastercard, SoFi will also add new benefits to the debit card, including cash-back rewards, free cell phone insurance, and discounted airport concierge services. SoFi also announced plans to launch its first credit card.

PeerIQ New Hire!

Laura Mun is currently a full-stack engineer on the front-end and platform team. Previously, Laura worked as a developer for various AR/VR/XR projects, including the Celestial Bodies exhibit at the Museum of Sex in New York City. In her spare time, Laura enjoys flexing her creativity in the culinary arts, building Arduino projects, and gaining inspiration from hikes and museums.

PeerIQ at SFIG 2020:

We are excited about the new capabilities PeerIQ has rolled out for owners and investors in whole loans. Schedule time with us at SFIG Vegas and we look forward to sharing more.

Industry News:

Negative Rates: Economists Explain What Happens if the Fed Gives Trump What he Wants (Forbes, 01/28/2020) Former President of the Minneapolis Fed, Narayana Kocherlakota, believes that negative rates are something that we should “keep in the toolkit.”
U.S. Economy Added 225,000 Jobs in January (WSJ, 02/07/2020) U.S. employers added 225,000 jobs in January and the unemployment rate was 3.6% in the same month.
Credit Reporting Bill Passes House but Faces Long Odds in Senate (American Banker, 01/30/2020) A package of bills that gives consumers the opportunity to repair their credit history passes the house.
Goldman Sachs in Talks with Amazon to Offer Small-Business Loans (LA Times, 02/03/2020) Goldman is close to finalizing a deal with Amazon to offer small-business loans to its U.S. customers.
Why Visa and Mastercard are Today’s Most Exciting FinTech Innovators (Forbes, 01/31/2020) Visa and Mastercard are powering most FinTechs.
Visa Planning Biggest Changes to Swipe Fees in a Decade (American Banker, 02/04/2020) Visa to charge merchants only when consumers make purchases using a card.
Worldline to Buy Ingenico for $8.6B in Major Payments Consolidation Play (Tech Crunch, 02/03/2020) Worldline to acquire Ingenico, a point-of-sale terminal provider that controls 37% of the market.
A Startup Aimed at Disrupting Payments and Taking on Square and Stripe Just Raised a $35 Million Series B Led by Sequoia Capital (Business Insider, 02/04/2020) Finix, led by CEO, Richie Serna, raised $35 million in a Series B round.
My Quarterly Marketplace Lending Results – Q3 2019 (Lend Academy, 01/27/2020) LendIt Co-Founder, Peter Renton, reveals his quarterly investment results for Q3 2019.
N26 Reaches 5 Million Customers, Including 250,000 in the US (Tech Crunch, 01/27/2020) Challenger Bank, N26, has accelerated to 5 million customers, half of which are from 2019.

Lighter Fare:

The Economics of All-You-Can-Eat Buffets (The Husle.com, 01/25, 2020) A breakdown of how all-you-can-eat buffets make money.