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Essential Fintech Reading: Oct 10-16

Millennials Eager To Use Their Smartphone Cameras In Banking

The ability to use their smartphone camera for service enrollment, identity verification or data capture is a critical factor in determining who millennials do business with, reports Jim Marous for the Financial Brand. 68 percent of millennials would prefer to use mobile capture instead of manually entering information, 54 percent report making mobile deposits in the last year and 83 percent think mobile capture will be a part of all mobile transactions within five years. "Businesses that want to attract millennial consumers will need to take notice of these findings and add more mobile capture functionality to their applications and services, because simply providing a mobile app isn’t enough anymore," writes Marous. MasterCard has taken heed, as it will soon roll out a "pay by selfie" feature that allows retailers to verify an online shopper's identity.

An Entirely Cashless Sweden?

A study by Niklas Arvidsson, a professor at Stockholm's KTH Royal institute of Technology, finds that Sweden is well on its way to becoming the first cash-free society. From bus fares to street magazines, the country has embraced digital payments, reports Quartz. However, there are still some obstacles that stand in the way of becoming completely cash-free, including "rising fraud rates, discomfort about personal electronic footprints, the problem of accommodating tourists, and reliability." A cashless Swedish music festival broke out in chaos when its payment system went down. Arvidsson notes that the movement to a cashless society runs the danger of excluding those who are unfamiliar with computers and mobile phones, largely older people in rural areas.

Younger Workers Struggle To Manage Their Finances

New research from MassMutual finds that millennials are struggling to manage their finances and select benefits. While 37 percent of respondents said they were struggling with managing their money, a startling 58 percent of millennials admit the same. The study revealed that many respondents were unsure whether they had the right amount of life insurance, were on track for retirement or had used their employer-provided benefits correctly. Covering the study for Forbes, Jamie Hopkins reported that 40 percent of respondents were distracted at work due to concerns about finances and that "this appears to be a growing concern among employees, as only 25% of respondents in a PricewaterhouseCoopers survey in 2014 found that it was a distraction."

Square Reveals Plans To Go Public Despite Growing Losses

Mobile payment startup Square made its IPO prospectus public, capping a busy week for CEO Jack Dorsey, who will be returning as CEO of Twitter. While Square's revenue increased by 54 percent to $850 million last year, its losses also increased to $154 million. Dorsey faces questions as to whether he can juggle both CEO roles and take a money losing company public. Inc. magazine's Maria Aspan notes that 95 percent of Square's revenue comes from processing payments and that this is a notoriously low margin business, as Square burns two-thirds of every dollar it brings in. "Square’s transaction costs-to-revenue breakdown (is) consistently more than 60 percent. As a rough comparison with a much more established competitor, PayPal’s transaction efficiency ratio is 30 percent: It spent $1.2 billion on transaction costs in the first six months of 2015, to process $3.9 billion of payments," writes Aspan. Square has cost itself dearly by paying the interchange fees charged by banks and credit card networks. 

Payment Processor Worldpay IPOs At Lofty Valuation, First Data IPO A Dud

Worldpay, a payment processor that was once part of Royal Bank of Scotland, saw shares gain ground upon its Tuesday IPO. Meanwhile, across the ocean First Data saw shares fall by 1.5 percent as the company returned to a public listing. The market outcomes were quite different for two of the five biggest payment processors in the world.  Worldpay has been priced at 22 times net profits forecast for 2016, 16 times earnings before interest, tax, depreciation and amortization; this is a lofty valuation compared to First Data at less than 12x EBITDA and fellow payments company Vantiv, which trades at 12.5x EBITDA. The Wall Street Journal notes that Worldpay could grow through various services, including helping small businesses maintain their books more efficiently and obtain loans through specialists who use Worldpay's data.