Credit Card Analysis: Pt. 3

Part
01
of three
Part
01

Consumer Motivations: Credit Card Aggregators

With the acquisition of Credit Karma by Intuit for $7 billion recently, the market for assistance on picking and choosing credit cards is likely growing. Motivations for using a credit card aggregator seem split between those looking to maximize rewards provided by credit cards, and those looking to manage their financial situation better by saving money on credit cards.

Motivations: Rewards and Financial Improvement

  • Credit card debt in the United States averaged $7,104 per household.
  • People appear to have two main motivations in using credit card aggregators: maximizing reward opportunities and improving their financial standing.
  • The first set of motivators are for people who have good credit and want to get more out of their credit cards, such as rewards for travel or cash back.
  • The second set of motivators are around addressing financial need and include transferring balances, lowering interest rates, or even getting started with student or secured credit cards.
  • A third motivator may be around opening up business credit cards, though only Credit Karma, SmartAsset, and Bankrate called out that possible motivation.
  • Most credit card aggregators offer a test or filters to find out which card might be right, based on the motivations listed above and considerations listed below.

Considerations: Low Interest and Card Types

  • All credit card aggregator sites reviewed, except ThePointsGuy, allowed a person to search for a credit card by their credit score, with the scores broken up into poor, fair, good, and excellent. This can be a good starting point to restrict a search for a credit card based upon what would be available to an individual.
  • Reward cards provide specific types of incentives for card users to redeem points or cash for certain products or services that those individuals value. ThePointsGuy highlights these types of cards for travel, airlines, and hotel experiences. Other types of rewards were searchable on all other credit card aggregators reviewed.
  • Cash back cards allow for some percentage of the total amount spent on the card to be refunded to the user in the form of cash to be used to pay the card bill, deposit into a bank account, or use for purchases. For individuals with good credit looking to use credit cards to maximize rewards, these cards can be useful. All credit card aggregators reviewed except ThePointsGuy highlighted this option.
  • Only SmartAsset discussed credit cards that do not charge a fee for use in a foreign country. For individuals looking for travel rewards, this kind of card can be attractive.
  • Credit card aggregators reviewing 0% annual percentage rate (APR) as an introductory or ongoing rate to support lower payments on credit cards included Credit Karma, Credit Sesame, Mint, Bankrate, and SmartAsset. Credit Sesame also called out a search feature for low interest rate credit cards. Low interest rate or 0% credit cards are usually tied into balance transfers, and help support people with credit card debt to save money.
  • Credit cards for balance transfers, or to move high interest debt from one card to a lower interest rate card to save money, were highlighted by all credit card aggregators reviewed except ThePointsGuy. Balance transfers are particularly attractive to individuals with existing credit card debt as a way to save money.
  • Student credit cards, or credit cards only eligible to students who are likely just starting their credit journey, were a search option on NerdWallet, Credit Karma, Mint, SmartAsset, and Bankrate.
  • No annual fee cards, or credit cards that do not require an annual fee to own, were available to search for on the sites SmartAsset and Credit Karma. For people looking to save money, a no fee credit card helps.
  • Secured credit cards, which require a cash deposit to secure and are used for people with low or no credit, were listed on Mint, SmartAsset, and Credit Karma. These cards are used to help establish credit for people.

Research Strategy

Research looked into the business models for the main credit card aggregators based on research about the companies from Craft, Comparably, and Crunchbase. Research was limited to the following sites as they had information available: NerdWallet, Credit Sesame, Credit Karma, ThePointsGuy, BankRate, Mint, and SmartAsset. Each site was explored to understand what they offered to consumers around credit cards, and listed the prebuilt search criteria on their sites as considerations. The research did not identify any quantitative study showing why people use these sites. Commonalities across the credit card aggregators selected were determined and used.

Part
02
of three
Part
02

Top Credit Card Aggregator Competitors, Pt. 1

Three of the top credit card aggregators in the United States are PayPal, Square, and Stripe. These three companies were selected in terms of their number of users, revenue, and market share. Full details of credit card aggregator competitors may be found in the attached spreadsheet.

PayPal

  • PayPal was founded in 1998 and allows individuals and businesses to send and receive payment through credit cards, bank accounts, and through other means without the need for sharing banking information. It is headquartered in San Jose, California with several global offices. PayPal solutions include PayPal Credit, Braintree, Venmo, Xoom, and Paydiant products.
  • PayPal reports that it has 227 million active account holders.
  • As of December 2019, PayPal reported a revenue of $4.96 billion.
  • PayPal is available in 200 markets. Its users can receive money in more than 100 currencies, withdraw funds in 56 currencies, and hold balances in their account in 25 currencies.

Square

  • Square was founded in 2009. It is headquartered in San Francisco, California with several global offices. Square allows individuals and businesses to send and accept credit card payments through the use of its software and hardware. Its hardware includes its Reader, Terminal, and Stand. In 2015, it launched Cash App (previously called Square Cash) which also allows its users with investment solutions.
  • Square does not overtly disclose their number of active account holders for all of its enterprises, but did recently publish that they have 24 million monthly active customers for their Cash App as of December 2019.
  • As of September 2019, Square reported a revenue of $1.27 billion.
  • Square is currently available in five countries including Australia, Canada, Japan, the UK, and the United States.

Stripe

  • Stripe was founded in 2011. It allows individuals and businesses to send and accept credit card payments through its online software. It is headquartered in San Francisco, California with 14 global offices.
  • Stripe reports that it has millions of users but does not give a definite number, nor does it define them as active or inactive.
  • Stripe is not publicly traded, but is valued at $35 billion.
  • Stripe is available in 45 countries with plans for further growth.
Part
03
of three
Part
03

Top Credit Card Aggregator Competitors, Pt. 2

Paypal, Square, and Stripe are industry leaders in the credit card services market. All three companies use a pay per-transaction pricing model and offer their services to a wide range of industries. A competitive analysis of the three firms has been completed and entered into the attached spreadsheet.

PAYPAL

  • PayPal offers the "One Touch" checkout feature, "Pay with Venmo" and "Braintree Direct," which are key differentiators created for the purpose of making payments easier for its users.
  • Over the years, Paypal has completed five funding rounds and raised a total of $216 million. Paypal's technologies include its website, app, and API. The company plans to expand its territories and product lineup by introducing a new Venmo branded credit card in late 2020.

SQUARE

  • Square, in a total of 8 funding rounds, from 2009 to 2015, raised a sum of $590.5 million.
  • The company's unique distinction is that it offers both software and hardware financial products. These products help consumers back up their credit card services with unique features such as data gathering and analysis.

STRIPE

  • Stripe, in a total of 11 funding rounds, from 2011 to 2019, has raised a total of $1 billion.
  • The company constantly seeks out unique technological solutions to financial problems that are both easy to set up and use. According to its website, the company gains new features every month through its "always-improving tool chain."

Further information is contained in the spreadsheet.
Sources
Sources

From Part 01
Quotes
  • "Options listed are balance transfers, rewards, cash back, travel, low interest, business, average credit, building credit, and student cards. "
Quotes
  • "Offers information on balance transfer cards, rewards, cash back, travel, business, 0% apr, bad credit, fair credit, secured cards, excellent credit, good credit, student, no annual fee, and premium rewards."
Quotes
  • "Focuses on rewards, cashback, 0% apr, low interest, balance transfers, and airline miles. It ranks credit scores for credit cards as well, with poor, fair, good, and excellent."
Quotes
  • "One of the ways NerdWallet tries to improve your credit score is through its financial product shopping feature. This is a terrific educational tool that lets you browse multiple product types to find alternatives that are better suited to you. It covers credit cards, banking, investing, mortgages, loans, insurance, money, and travel. As you click each of these, a new set of menus opens. Under Credit Cards, for example, you can search for the "Best of" in such categories as rewards, cash back, and balance transfers. You can also compare cards, as well as read reviews and helpful articles. Other product areas offer similar options."
Quotes
  • "“The have-nots care about getting access to credit, will I get approved for this credit line, what will be my limit, can I get a free credit score, how to get paychecks early and micro investing. People with more financial choice have a different problem. They know they are attractive to financial institutions and see so many options, bells and whistles. They want help in comparing their options.”"
Quotes
  • "The power of free. Credit Karma embraced a media model, not a tech model. They’re a publisher providing information and advice. Give it away and collect eyeballs … not just any eyeballs, but eyeballs with a specific purchase intent for credit products."
Quotes
  • "Lists the following filters: 0% intro apr, balance transfer, cash back, rewards, secured, student, and travel."
Quotes
  • "Breaks out credit cards by provider, credit score, and the following benefits: 0% apr, balance transfer, generic rewards, gas rewards, no fee cards, cash back, travel, airline, hotel, student, secured, no foreign transaction fees, and small business."
Quotes
  • "Breaks out by credit score, and also the following categories: balance transfer, 0% interest, cash back, travel, business, reward, and student."
Quotes
  • "Their focus is on hotels, airlines, and generic travel rewards. Some discussion of credit cards to buy items to support those goals."
Quotes
  • "In credit card test, it asks if you are interested in cash back, travel, or lower interest rates."
From Part 02
Quotes
  • "A payment aggregator is a service provider that allows merchants to process mobile or e-commerce payments. They let businesses accept credit and debit card payments without setting up a merchant account through a bank."
Quotes
  • "...we've compiled a list of the industry's leading companies to help you decide. Keep in mind that no one company or gateway has an overwhelming share of the market, and competition among these companies remains strong."
Quotes
  • "Fueled by a fundamental belief that having access to financial services creates opportunity, PayPal (NASDAQ: PYPL) is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy."
Quotes
  • "We started with a little white card reader but haven’t stopped there. Our new reader helps our sellers accept chip and PIN and contactless payments, and we have tools for customers, too, like our Cash App, which lets people send money instantly to family or friends."
Quotes
  • "Cash App is the simplest way to start investing in your favorite companies."
Quotes
  • "Stripe is a technology company that builds economic infrastructure for the internet. Businesses of every size—from new startups to public companies—use our software to accept payments and manage their businesses online."
Quotes
  • "US online payments company Stripe has raised $250 million in new funding round, creating a fintech company with an enterprise value of $35 billion, as per the latest fintech industry news."
From Part 03
Quotes
  • "Today we’re taking our efforts one step further by launching a Spanish-language experience on our newest hardware device, Square Terminal."
Quotes
  • "We have all kinds of point-of-sale packages—for all kinds of businesses. Payments are built right in."
  • "We don’t charge different rates for different credit cards. Visa, Mastercard, Discover, and, yes, American Express all cost the same rate."
  • "No startup fees, authorization fees, statement fees, refund fees, PCI-compliance fees, business card fees—you get the idea."
Quotes
  • "Square has raised a total of $590.5M in funding over 8 rounds. Their latest funding was raised on Jun 5, 2015 from a Venture - Series Unknown round"
Quotes
  • "https://squareup.com/us/en/townsquare/pos-api-for-developers-square"
Quotes
  • "In April 2017, Stripe launched Increment, a quarterly print and digital magazine about how teams build and operate software systems at scale. Its mission? To act as a dependable resource, offering stories, insights, and advice to inspire and support developers—with valuable learnings from some of the tech industry’s most effective software teams."
Quotes
  • "Access a complete payments platform with simple, pay-as-you-go pricing"
Quotes
  • "Stripe has raised a total of $1B in funding over 11 rounds. Their latest funding was raised on Sep 19, 2019 from a Series F round"
Quotes
  • "Stripe offers mobile applications for both iPhone and Android devices to allow you to access your Dashboard from your mobile device. "
Quotes
  • "Simple integration Use Stripe’s API or pick a pre-built solution."
Quotes
  • "Popular payments service Paypal has also confirmed its plans to launch UPI-based payments service in India. The service is popular among people for sending and receiving payments from other countries."
Quotes
  • "Among the initiatives is progressing a plan to offer a Venmo-branded credit card in partnership with Visa and financial services company Synchrony, and increase its online merchant footprint."
Quotes
  • "The People’s Bank of China has approved PayPal’s acquisition of a 70% equity state in GoPay (Guofubao Information Technology Co. [GoPay], Ltd.), which will make PayPal the first foreign payment platform to provide online payment services in China. GoPay has licenses for online and mobile transactions, and mainly provides payment products for industries including e-commerce, cross-border commerce, aviation tourism and others."
Quotes
  • "SAN JOSE, Calif., Jan. 6, 2020 /PRNewswire/ -- PayPal Holdings, Inc. (NASDAQ: PYPL) announced today that it has completed its acquisition of Honey Science Corporation for approximately $4 billion in cash. This transaction will transform the shopping experience for PayPal's consumers while increasing sales and customer engagement for its merchants."
Quotes
  • "PayPal has raised a total of $216M in funding over 5 rounds. Their latest funding was raised on Feb 16, 2001 from a Series D round"
Quotes
  • "The PayPal Mobile app is available for iPhone and Android. You can download the app to your computer from our website."