- This is an excerpt from a story delivered exclusively to Business Insider Intelligence Payments Briefing subscribers.
- To receive the full story plus other insights each morning, click here.
Ride-hailing giant Uber filed its S-1 last week as it plans to go public on the New York Stock Exchange (NYSE), shedding light on its financial performance. Uber’s initial public offering (IPO) is expected to value the company at $100 billion, which would make it the world’s largest IPO, surpassing Alibaba’s record $25 billion IPO.
Creative Lab / Shutterstock.com
Here’s what it means: The filing offers a glimpse into Uber’s massive card business, underscoring its potential to further establish a position in financial services.
Uber counted nearly $50 billion in gross bookings in 2018 — 87% of which were made through debit or credit cards. Gross bookings are defined as the total dollar volume, including taxes, tolls and fees, across Uber’s services. Gross bookings rose 45% annually last year from $34.4 billion in 2017, and up 79% from $19.2 billion in 2016.
The volume of users who store card information in Uber represents a large addressable base the firm can target more offerings to. And while the plurality of bookings were made via debit or credit, Uber also offers other payment options, like Uber Cash, a service that allows customers to add funds to a stored-value account that they can use to pay for Uber services like rides or Uber Eats, which it launched late last year.
Uber saw $43.5 billion in card volume in 2018. The firm didn’t disclose how much it paid to accept cards in 2018, but Uber paid $749 million in credit card processing fees in 2017, up 62% from $461 million in 2016, making it likely that its card processing fees increased last year alongside increases in volume.
The bigger picture: Uber’s S-1 highlighted that the firm is far from sustained profitability, but going public could position Uber well to build out a more robust — and potentially lucrative — financial services segment.
Uber can mirror Southeast Asian (SEA) ride-hailing giant Grab’s strategy to build out financial services into a separate arm. Ride-hailing services have been pushing deeper into financial services — spearheaded by Grab, which is reportedly considering spinning off its financial services unit.
And other ride-hailing firms like Lyft and Go-Jekhave forayed into financial services with varied offerings. Uber, meanwhile, has ramped up its payment offerings in the last two years through a partnership with Venmo; a cobrand credit card with Barclaycard; a debit card for its drivers; and most recently, a loyalty program for purchases made on Uber services with the launch of Uber Rewards.
Building out its existing financial services into a separate segment can allow Uber to diversify its streams of revenue and move the needle toward profitability.
And Uber can leverage its massive reach and engaged customer base to promote new offerings. Ride-hailing apps are particularly well-suited to build out payments offerings because they typically have access to a large and engaged user base, which they can easily cross-sell on other services.
Uber counts 91 million users across its ecosystem of consumer-facing services, for example. Given Uber’s reach, delving deeper into financial services could be a successful and lucrative play. That’s especially true as consumers become more comfortable with accessing financial services digitally and the payments industry shifts to a mobile-driven environment: JPMorgan Chase, for example, saw its branch teller transactions per customer decline 41% between 2014 and 2018, while 80% of its transactions were completed through digital platforms.
Interested in getting the full story? Here are two ways to get access:
1. Sign up for the Payments Briefing to get it delivered to your inbox 6x a week. >> Get Started
2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the Payments Briefing, plus more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
See Also:
- Chase and Wells Fargo need to boost engagement among existing mobile users
- Coinbase has launched a crypto debit card in the UK
- Physical ATM attacks in Europe were on the rise for the fourth consecutive year in 2018
SEE ALSO: THE PAYMENTS INDUSTRY ECOSYSTEM: The trend towards digital payments and key players moving markets
Source: Business Insider – feedback@businessinsider.com (Rachel Green)