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Investing.com - JPMorgan Chase (NYSE:JPM)’s plan to charge fees for access to customer bank account information sent fintech stocks lower, with PayPal (NASDAQ:PYPL) and Block (NYSE:SQ) shares dropping 5% on the news, according to Bernstein analyst Harshita Rawat. PayPal, currently trading at $68.68, appears undervalued according to InvestingPro Fair Value metrics.
The fees will likely be assessed on a per API call basis and could vary depending on the type of data request, such as account verification, balance checks, identity verification, or transaction information. According to CPFB data cited by Bernstein, as of 2022, at least 100 million consumers had authorized third parties to access their account data, resulting in over 50 billion access instances.
Bernstein suggests the impact on larger fintech companies may be more limited than market reaction indicates. The analyst notes that companies like PayPal and Block likely have negotiated fees with large banks like JPMorgan on a multi-faceted basis, covering cards, processing, and other relationships. InvestingPro data shows PayPal maintains strong financial health with a healthy current ratio of 2.27 and steady revenue growth of 4.6% over the last twelve months.
Additionally, Bernstein points out that PayPal and Block probably have limited exposure to data aggregators, and PayPal specifically is not overly reliant on open banking data for its payment capabilities, having built solid underwriting and risk capabilities over two decades. Get deeper insights into PayPal’s financial strength and growth potential with a comprehensive Pro Research Report, available exclusively on InvestingPro.
The analyst also suggests there could be tiered fees that may impact smaller players more significantly, while larger companies like PayPal likely have significant negotiating leverage with data aggregators due to their scale, and may have pass-through protections in their agreements. Trading at a P/E ratio of 16.2x, PayPal’s market position remains robust despite recent market volatility.
In other recent news, Square has expanded its presence in the UK by launching a new handheld point-of-sale device designed for the food and beverage industry. This device, which is water-resistant and features an all-day battery life, aims to enhance operational efficiency for businesses. Additionally, Square has announced new software features for UK restaurants, including QR code payments and centralized menu management. Meanwhile, in Canada, Square has strengthened its partnership with Live Nation Canada, becoming the exclusive payment processor at major concert venues and festivals for the next three years. This includes the newly launched Square Handheld devices, which will be used at venues like Rogers Stadium.
In the United States, Square has introduced a new artificial intelligence tool, Square AI, in open beta. This tool provides data insights for sellers, helping them analyze sales metrics and customer trends directly from the Square Dashboard. On the financial front, UBS has maintained its Buy rating for Block, Square’s parent company, with a $70 price target, citing confidence in the company’s evolving ecosystem. Jefferies has also raised its price target for Block to $75, highlighting the company’s strategic hiring and market expansion efforts. These developments reflect Square’s ongoing commitment to innovation and market growth.
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