Square and Cash App experience daylong outage

Square and Cash App experience daylong outage, Consumer Financial Protection Bureau takes aim at Apple Pay, and Nubank launches personal loans in Mexico

September 11, 2023

Hi!

Square and Cash App experienced a daylong service outage last week. Payment companies work hard to prevent outages, yet those happen from time to time. It’s one thing when you cannot post an update on Facebook/X, it’s another thing when you cannot pay at a restaurant on Friday night with your card. It’s not fun for anyone, so kudos to the employees of Block working through this incident!

More on this in today’s newsletter:

  • Square and Cash App experience daylong outage,

  • Consumer Financial Protection Bureau takes aim at Apple Pay, and

  • Nubank launches personal loans in Mexico

Thank you for reading and have a great week!

Jevgenijs

p.s. have feedback? DM me on Twitter

Square and Cash App Experience Daylong Outage

Square experienced a daylong outage that disrupted its services and affected small business owners' ability to process payments. The outage began on September 7 and continued until the following day when engineers implemented a fix. The exact cause of the outage remains unknown, and Square has not provided details on the number of affected users. Cash App, owned by Square's parent company Block, also experienced an outage that impacted users’ ability to send payments and make purchases with Cash Card. Block shares (NYSE: SQ) closed more than 5% lower on Thursday on the news of the outage.

Image source: Square on X

Payment companies build a lot of redundancy in their systems to ensure high availability of the service, yet incidents happen from time to time. In the summer of 2018, Visa experienced a hardware failure that impacted card transactions for millions of cardholders in the UK and Europe on Friday night. The incident began at 14:35 PM British Summer Time on June 1 and was resolved only after midnight. Following the incident, the Bank of England tasked Visa to appoint an independent third party, PricewaterhouseCoopers, to conduct an investigation into the incident and implement remediating actions.

Consumer Financial Protection Bureau Takes Aim at Apple Pay

The U.S Consumer Financial Protection Bureau (CFPB) has released a report focusing on the role of Big Tech companies, namely Apple and Google, on mobile payments. The report highlights that the use of mobile wallets has grown considerably in the U.S., with estimated transactions nearing $300 billion across Apple Pay, Samsung Pay, and Google Pay. However, Apple's restrictions limit consumer choice by requiring the use of Apple Pay on iOS devices, while Google's Android system allows more flexibility. The CFPB emphasizes that these restrictive practices can hinder consumer choice and innovation, and is considering regulatory changes to promote greater consumer control and interoperability.

This figure shows the forecast U.S. mobile proximity payment users broken down by digital wallet between 2021 and 2026, from the source Insider Intelligence/eMarketer. Apple Pay shows a little more than 45 million users in 2021 and that figure steadily increases each year to almost 70 million users in 2026. Google Pay shows almost 30 million users in 2021 and that figure steadily grows to around 40 million users in 2026. Samsung Pay has a little less than 15 million users in 2021 and that grows to a little over 15 million users by 2026.

Image source: CFPB

Apple continues venturing into the financial services industry. Thus, Apple Card's Savings account, offered in partnership with Goldman Sachs, has attracted over $10 billion in deposits in less than five months since its launch in April 2023. Managed by Goldman Sachs, these accounts are FDIC-insured, offer a competitive 4.15% annual percentage yield, charge no fees, and do not have a minimum deposit or balance requirement. Users can manage their Savings account through the Wallet app, including tracking balances and interest earned, and add extra funds from linked bank accounts or Apple Cash. The company launched Apple Pay in 2014, Apple Cash in 2017, and Apple Card in 2019.

Nubank to Launch Personal Loans in Mexico

Nubank (NYSE: NU) is planning to introduce personal loans in Mexico to expand its financial services offerings in the country. The new product will enable customers to access personal loans in under five minutes through Nubank's digital platform, and initially will only be available to employees of the company before a broader market release. Earlier this year, Nubank started offering savings accounts in Mexico, which proved to be successful, attracting over one million users within a month. The company sees significant growth potential in the Mexican market and aims to expand its presence further.

In the second quarter of 2023, Nubank added 4.6 million customers across its three markets bringing the total to 83.7 million. Nubank is now the fourth-largest financial institution in Brazil in terms of the number of customers, and has 3.6 million customers in Mexico and 0.7 million customers in Colombia. The company’s revenue in the second quarter increased by 61% YoY to $1.87 billion, and the company reported a net income of $224.9 million compared to a net loss of $29.9 million a year ago. Nubank had an interest-earning loan portfolio of $6.3 billion (up 97% YoY), while the total deposits were $18.0 billion (up 35% YoY).

PayPal (NASDAQ: PYPL) used to trade at a premium P/E and EV/EBITDA multiples compared to Fiserv (NYSE: FI), FIS (NYSE: FIS) and Global Payments (NYSE: GPN). Not anymore...🤷🏻‍♂️

Cover image source: Square

Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.