Uber & Lyft’s War for Market Share and the Aspect Of Prevailing Charge-offs
The month of August has come and the season of fall is about to set in. Related to this a question arises whether in a few weeks time the plethora of products will be back on the shelves again.
However, there are still a few weeks left before the scenario sets in so it is advised to enjoy the time being with some good reading content.
Related to this aspect of Data Dive, the atmosphere related to the chartbusters prevailing in the locality is created without any cost. Featured are amazing reversals, innovative moves related to the commerce industry and even a doomsday clock with countdown pointing to disaster.
Previously when Prosper Marketplace attempted to get funding, an amount summing up to $165 million was snagged with relation to the investors associated with Credit Suisse Group AG Next. With that increment, the brand was associated with scraping a sum of worth $2 billion. That was two years ago.
Now the things have changed where the brand is showing signs of being embraced by the investor base.
Based on analysis done last week, the brand is thinking of implementing a financing scheme where the value could drop to approximately $ 550 million. This is with regards to taking into account the nearly $ 2 billion valuations associated with it two years back.
This will result in Prosper to amass $ 50 million from the Chinese consortium Linca valued at a 10% stake thereby removing two-thirds of its valuation metrics.
Similar to other marketplace lenders, it had a rough time in the last 1 and a half years as the need for marketplace loans from investors had shrunk considerably.
Last year related to that, there was a loss of nearly 120$ million when evaluated with that criterion being $ 26 million in 2015.
The new CEO of the brand David Kimball who took up the role in December mentioned that productivity is the main target for the firm. Soon he made the step to sell off loans worth 5 billion dollars to a sector of investors during the subsequent 2 years inclusive of the warrants to buy shares with are worth 35 % of the brand. The deal which was done in February encompassing organizations like Soros Fund Management LLC and Jefferies LLC proved beneficial for the former.
The Linca investment serves to promote that Prosper will have the capital to plunge into future investments, all for a huge price.
The country’s most dominant ride hailing service apps namely Uber and Lyft will take the step into the card payments domain by developing credit cards for them.
Sources say that Uber will collaborate with an off shoot of the credit cards issuer- Barclays.
A spokesperson noted that this was a great chance for Barclaycard to associate with a ubiquitously recognized brand namely Uber.
The information related to the same when taking Lyft into account is very scarce and dispersed. But according to reliable sources, the firm is also following the same method as Uber.
Speaking of the Uber credit card, it will be rolled out in the fall season and it will be associated with Visa network for activating and maintaining it. This venture comes at a time when Uber has lost some of its share with Lyft. Simultaneously Lyft wants to exploit the pitfall and generate more funds to tackle its rival.
The credit card will be developed to operate outside Uber, and the reward points associated with them along with the rewards remain undisclosed. Currently, a group of card companies is beforehand generating rewards which can be used with respect to Uber. To quote an instance, the American Express conglomerate provides 200 dollars annually in free Uber rides for the associated card users.
More news will surface as Uber and Lyft have plunged into a wholly different world related to commerce.
Related to the credit card world, charge-offs are detrimental and it is compounded by an onslaught of them. This is the reason why charge-offs associated with cards have peaked a 4 year high after a time period of incessant rises. This raises concerns and anxiety for the market watchers.
According to Charles Peabody, who is a top ranking executive at Compass Point Research and Trading LLC, there has been the generation of an infection point related to the same and the matters look to spiral beyond control.
These foreboding misgivings are based on the report that in the second quarter, the credit card defaults factor has risen to 3.29 % which is the highest in the previous 4 years.
This quarter also was notable for the 5th uninterrupted year-over-year rise in charge-off rate. This signifies to be related to a current trend that is prevailing in the market.
Contrary to the existing facts when evaluating with the past quarters where the notion of losses was more for the financial firms involved in subprime issuing, the country’s biggest issuers encompassing JPMorgan Chase & Co, Capital One, and such registered raises in the related aspect. These were profound in the first half of the year where it signifies that consumer pullback is pretty soon going to emerge and impact
However, in the midst of this overwhelming wave of bad news, there is a sign of hope. 7 years back when credit card defaults accounted for 10% and nobody is worried regarding the resurfacing of the same scenario again. A lot of people look at this as a sign of rectification and resolution which is generated after a time span associated with colossally low statistics related to charge-offs. However, others are at the polar opposite with regards to opinion
David Nelms from Discover noted that the scenario is rapidly worsening and it is not like what the scenario was some years back.
This credit card default pandemic in 2010 resulted in a form of credit freeze which was corrected only when the financial firms and banks softened their guidelines related to gaining maximum yield all associated with the user base having a minimal credit score.
Based on what the Federal Reserve had to say, in the period of last year, the card balances increased by 6%, which is an increase of 1% from nearly 4 years back.
It is not only the credit cards which are facing this scenario, there is an increase in the default statistics associated with auto loans and the delayed payments are also on the rise. However, the impacts are confined to the subprime borrowers of that field.
These pitfalls associated with credit card instability are a source of worry for the analysts and economists as the unemployment rate in the United States is currently at a very low level. If the prospects related to job markets had a detrimental change, then the shaky looking credit markets can become a big source of concern and importance.
From the topic, it is quite clear that the ride hailing apps Uber and Lyft signify the saying that Great Minds think the same. This is profound in scenarios where there is intense vying between the brands related to amassing market shares. Special attention must be focused on the defaults associated with consumer loans as well.