Block’s stock price is down 80%; Klarna returns to profitability as more shoppers borrow; Adyen’s fighting to scale and PayPal is fighting to keep it;

In this edition:

1?? Plaid enters the lending business with consumer reporting agency (CRA) services

2?? Klarna returns to profitability as more shoppers borrow

3?? Block’s stock price is down 80%?

4?? Building a Credit Card Payment Processing Platform on AWS - Part 2

5?? Adyen’s fighting to scale and PayPal is fighting to keep it

6?? Deep Dive: Web 1.0, Web 2.0, Web 3.0: How Digital Payments Have Changed Over Time

7?? Tokenization Use Cases Bible 2023

News

***

Plaid enters the lending business with consumer reporting agency (CRA) services

Plaid has formed a new entity that will build solutions for customers who want ready-made credit risk insights from consumer-permissioned cash flow data.?

***

Klarna returns to profitability as more shoppers borrow

The Stockholm-based fintech reported an operating profit of 130 million Swedish kronor ($12 million) for the three months through September, while revenue rose by about 30% to 6 billion kronor. It's the firm's first profitable result since the second quarter of 2019.

***

Block’s Stock Price Is Down 80%.?

The payments company is under pressure. The often-distant CEO says he is stepping back into the ring.

***

Revolut appoints new UK CEO as British banking license is still pending

Revolut , the fintech giant based in the U.K., has appointed a new CEO for its U.K. division. Francesca Carlesi will be in charge of Revolut’s division in its home country — Nik Storonsky remains the CEO of Revolut Ltd.

Insights

***

Building a Credit Card Payment Processing Platform on AWS - Part 2

AWS reference architecture for acquiring authorization

The high-level architecture diagrams below present the main components of the Authorization system and its communication model between different channels and various schemes when built on AWS.

The flow starts with various channels sending encrypted card information to the Authorization system through secured communication lines to Amazon API Gateway. AWS WAF can be enabled to protect your API Gateway API from common web exploits, such as SQL injection and cross-site scripting (XSS) attacks. API Gateway is integrated with Amazon Cognito to ensure that only authorized users have access to the API, and that the resources are protected from unauthorized access.

Authorized payment transaction is sent to Amazon Managed Streaming for Apache Kafka (MSK) via Network Load Balancer. PCI requires card holder data to be encrypted both in transit and at rest. Amazon MSK uses TLS 1.2 by default and recommend TLS 1.3, as it encrypts data in transit between the brokers of MSK cluster.? TLS encryption in transit (client-to-broker, broker-to-broker), TLS-based certificate authentication, and SASL/SCRAM authentication can be achieved with the assistance of AWS Secrets Manager. The transactions in a Kafka topic are consumed in real-time by AWS Fargate containers. AWS Fargate can be used with Amazon ECS to run containers without having to manage servers or clusters of Amazon EC2 instances. You can use your Amazon ECR private repositories to host container images and artifacts that your Amazon ECS tasks may pull from.

The container passes data to a payment HSM (Hardware Secure Module) and receives the decrypted data. The Payment HSM can be provisioned through our newly launched AWS managed Payment HSM service – AWS Payment Cryptography. The DynamoDB client-side encryption library can be used to encrypt the original text and store the ciphertext in the cipher database. The token response is stored in the application database for internal application operations. In-memory data cache with sub-millisecond latency on Amazon ElastiCache for Redis can be used to immediately to server the card availability requests for card networks. The tokenized information can be run against various business flows using AWS Step Functions to validate Bin checks, Risk checks, Account checks, Fraud checks and other value-added services based on the card and transaction type. After validation, the response is formatted to an ISO format and sent to an egress Amazon MSK for consumption. Multiple Kafka listeners can make connections to the card networks.

Part 1 - Building a Credit Card Payment Processing Platform on AWS

Source AWS / Amazon

***

Adyen’s fighting to scale and PayPal is fighting to keep it

Adyen and PayPal are feeling the 2023 heat. While Adyen is battling dropping shares and low revenue growth, PayPal is busy tackling an antitrust lawsuit for violating the US competition laws due to its anti-steering policies.

Adyen’s revenue pickle

Adyen’s recent earnings call revealed that the company’s revenue fell short of expectations, which caused shares to drop and wiped out $20 billion in market value. All of this was new for Adyen, which has been growing steadily since its launch in 2018, and has ridden the pandemic payments boom.

Adyen’s promise and threat were most visible when eBay opted for the company as its payments provider instead of its former subsidiary, PayPal.

But the company’s aggressive expansion rate has had a direct impact on its profits. Earlier this year, when most companies were laying off their employees Adyen was in hiring mode. Even then, operating expenses were starting to bring down profit margins, with the company reporting only a 4% YOY growth in H2 2022, but with a 64% YOY growth in operating expenses.

For H1 2023, Adyen reported $804.3 million in total revenue which was 21% more than last year but below the 40% YOY growth investors had grown to expect. Adyen saw an 83.2% increase in wages and salaries since last year. But overall the company’s outlook remains cautiously positive.

PayPal’s tiff with merchants

Earlier this month, a class-action lawsuit was filed against PayPal in California and Georgia, alleging that the payments company’s contract restricts merchants from steering customers to more cost-friendly payment options using price incentives. The plaintiffs added in a statement that PayPal’s anti-steering rules result in consumers paying millions in excess charges annually.

According to the lawsuit, PayPal’s anti-steering rules are embedded into merchant contracts and control what actions merchants can take in certain scenarios. Without these rules, consumers would be more able to make informed choices and be in a position to delineate between PayPal’s rates and those of its competitors like Stripe and Shopify, according to the plaintiffs. Merchants are also barred from telling customers that other payment options are more economical and cannot present these options earlier in the checkout flow.

The company’s anti-steering rules state that “in representations to your customers or in public communications, you must not mischaracterize any PayPal or Venmo services or exhibit a preference for other payment methods over PayPal or Venmo services. Within all of your points of sale, you agree not to try to dissuade or inhibit your customers from using PayPal or Venmo services or encourage the customer to use an alternate payment method.”

Source Tearsheet

***

Deep Dive: Web 1.0, Web 2.0, Web 3.0: How Digital Payments Have Changed Over Time

From the early days of Web 1.0, when payments were mostly limited to credit card transactions, to the rise of third-party payment processors in Web 2.0, to the emerging era of decentralized, peer-to-peer payments in Web 3.0, we explore how digital payments have evolved over the years.

If you're interested in learning more about how digital payments have changed over time and what the future holds, be sure to check out the latest edition of Fintech Wrap Up.

Source Fintech Wrap Up

Reports

***

Tokenization Use Cases Bible 2023