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I think Uber missed the opportunity to be a more full fledged wallet (which is what Grab started a few years ago). They have a "cash" product now where you can

by tempsy 7y ago

I think Uber missed the opportunity to be a more full fledged wallet (which is what Grab started a few years ago). They have a "cash" product now where you can load money, but it's too little too late IMO, and the incentive to load money vs use your cc is small (e.g. tiny discount). Starbucks is the obvious model here...IIRC they have one of the most success mobile payment apps in the country, even competing with Apple Pay despite being relevant to them alone. They have something like $1.6 billion in balances, which they can monetize (free loan + interest).

novok 7y ago
Don't wallet plays make more sense in places without strong CC usage already? Uber is strongest in developed countries, which have a strong CC culture already.
- tempsy 7y ago
  How do you explain the popularity of the Starbucks mobile app? The fact that it rivals Apple Pay in usage is proof that the answer is no.
  - novok 7y ago
    But people don't use it more than a special gift card and loyalty program although, and it seem that starbucks does not have ambitions to be a general wallet. I'm guessing why starbucks promoted it heavily is to reduce card fees eating into their margins and all the other typical loyalty and gift card reasons. I'm not seeing rumblings anything close to something like grab pay coming from starbucks for example.
    - rossdavidh 7y ago
      Exactly. The typical purchase size at Starbucks is small enough that the CC fees (which are something like 3%, but also have a minimum per-transaction cost which is something like $0.25) are problematic. If all that Starbucks gets out of it is that those people who use their wallet are paying about $0.20 more to Starbucks (and not the CC company) per purchase, that already is a win for them. Plus, many Starbucks customers go there 5 days a week, so it is easier to get a one-place payment method used. For other places, where one shops once a week or once a month, it would be harder to get people into the habit of using their special payment method for just them.
      - tempsy 7y ago
        In urban cities like SF people use Uber just as frequently. It isn't a once a week or once a month purchase. Point is Uber shares a lot of the same purchasing behavior as a Starbucks customer (low dollar, high frequency) and would stand to benefit from a similar wallet app. I believe Uber is also working with some cities to be the app to buy public transit tickets from, so there is some path forward to using an Uber wallet to buy other things. And again, as I pointed out in my original comment, Starbucks is not just saving per coffee transaction fees - they are monetizing $1.6 billion worth of balances. They even consider "old" balances that haven't been touched in a long time an asset vs liability (e.g. forgotten gift cards become free money).
harryh 7y ago
Starbucks' annual revenue is about 25 billion. Let's say they are making a (very generous!) 5% on that balance. That's 80 million dollars or about 0.3% of their annual revenue. Starbucks doesn't run its payment app so they can make money on the float.
- tempsy 7y ago
  Uh why would you consider it revenue? It’s more like risk free profit. Meaning they keep some tiny amount of every cup of coffee sold, but 100% of interest earned. And it’s important enough that they call it out in their earnings report. And the more interesting use case is that it’s a billion dollar 0% loan, not necessarily that they make interest off it sitting in a bank.
  - harryh 7y ago
    And the more interesting use case is that it’s a billion dollar 0% loan Maybe this would have been exciting a decade or two ago before interest rates dropped so far. Now Startbucks can issue all the debt it wants for...checks notes...about 2.3%.
    - tempsy 7y ago
      Ok. That is still more than 0. And it will continue to be 0 whether interest rates rise or fall in the future. And you missed the other point about how they actually move gift card liabilities to assets after a certain about of time because people forget about balances, so it’s actually negative. I think it’s a bit naive to think that holding $1.6b in balances is not useful or meaningful to Starbucks or a company hoping to emulate their mobile wallet success.
  - mandelbrotwurst 7y ago
    This feels pedantic, but to answer your question: because it is revenue and calling it profit is incorrect. It may be a very good revenue source which a high margin and very low expenses associated with it resulting in a large profit, but money in is revenue and money in net of expenses is profit. Parent was discussing the former.

by tempsy 7y ago

novok 7y ago

Don't wallet plays make more sense in places without strong CC usage already? Uber is strongest in developed countries, which have a strong CC culture already.

tempsy 7y ago
How do you explain the popularity of the Starbucks mobile app? The fact that it rivals Apple Pay in usage is proof that the answer is no.
- novok 7y ago
  But people don't use it more than a special gift card and loyalty program although, and it seem that starbucks does not have ambitions to be a general wallet. I'm guessing why starbucks promoted it heavily is to reduce card fees eating into their margins and all the other typical loyalty and gift card reasons. I'm not seeing rumblings anything close to something like grab pay coming from starbucks for example.
  - rossdavidh 7y ago
    Exactly. The typical purchase size at Starbucks is small enough that the CC fees (which are something like 3%, but also have a minimum per-transaction cost which is something like $0.25) are problematic. If all that Starbucks gets out of it is that those people who use their wallet are paying about $0.20 more to Starbucks (and not the CC company) per purchase, that already is a win for them. Plus, many Starbucks customers go there 5 days a week, so it is easier to get a one-place payment method used. For other places, where one shops once a week or once a month, it would be harder to get people into the habit of using their special payment method for just them.
    - tempsy 7y ago
      In urban cities like SF people use Uber just as frequently. It isn't a once a week or once a month purchase. Point is Uber shares a lot of the same purchasing behavior as a Starbucks customer (low dollar, high frequency) and would stand to benefit from a similar wallet app. I believe Uber is also working with some cities to be the app to buy public transit tickets from, so there is some path forward to using an Uber wallet to buy other things. And again, as I pointed out in my original comment, Starbucks is not just saving per coffee transaction fees - they are monetizing $1.6 billion worth of balances. They even consider "old" balances that haven't been touched in a long time an asset vs liability (e.g. forgotten gift cards become free money).

harryh 7y ago

Starbucks' annual revenue is about 25 billion. Let's say they are making a (very generous!) 5% on that balance. That's 80 million dollars or about 0.3% of their annual revenue. Starbucks doesn't run its payment app so they can make money on the float.

tempsy 7y ago
Uh why would you consider it revenue? It’s more like risk free profit. Meaning they keep some tiny amount of every cup of coffee sold, but 100% of interest earned. And it’s important enough that they call it out in their earnings report. And the more interesting use case is that it’s a billion dollar 0% loan, not necessarily that they make interest off it sitting in a bank.
- harryh 7y ago
  And the more interesting use case is that it’s a billion dollar 0% loan Maybe this would have been exciting a decade or two ago before interest rates dropped so far. Now Startbucks can issue all the debt it wants for...checks notes...about 2.3%.
  - tempsy 7y ago
    Ok. That is still more than 0. And it will continue to be 0 whether interest rates rise or fall in the future. And you missed the other point about how they actually move gift card liabilities to assets after a certain about of time because people forget about balances, so it’s actually negative. I think it’s a bit naive to think that holding $1.6b in balances is not useful or meaningful to Starbucks or a company hoping to emulate their mobile wallet success.
- mandelbrotwurst 7y ago
  This feels pedantic, but to answer your question: because it is revenue and calling it profit is incorrect. It may be a very good revenue source which a high margin and very low expenses associated with it resulting in a large profit, but money in is revenue and money in net of expenses is profit. Parent was discussing the former.