The new way to pay a pal
Peer-to-peer payment is an ever-growing and developing industry, and one of the most popular companies enabling this is PayPal.
PayPal was formed in 1998 (named Confinity at the time), and has become the go-to for businesses and individuals alike as a simpler way to pay and be paid. Just four years after its inception, PayPal became a wholly-owned subsidiary of eBay, and in 2014 – a landmark year for the company – it generated 44 percent of eBay’s total profits. In 2015, eBay made PayPal an independent company again, and it was valued that year at $46.6 billion.
Also in 2015, PayPal saw a 42 percent increase in P2P volume on the previous year worldwide; with the service being used increasingly on mobile devices, it was only natural for the next step to integrate PayPal even further and allow an extra shortcut towards making payments.
According to the company’s research, Canadians alone average $462 in unpaid IOUs from friends and family, but PayPal’s integration with Apple’s intelligent personal assistant, Siri, could end the discomfort of owing and being owed cash.
All users require is the PayPal app and iOS 10 or above. It’s as simple as saying “Siri, pay Nell $15 for breakfast,” Siri communicates with PayPal, and PayPal does the rest. If for whatever bizarre reason you have more than one contact named Nell, Siri will clarify which one you mean first.
The Siri integration has now worked its way to 30 countries and even more languages, and according to Meron Colbeci, Senior Director of Core Consumer Products at PayPal, it was the result of a long and fruitful relationship between PayPal and Apple.
“We’ve enjoyed a long partnership,” he explains. “We currently work with Apple to help people make purchases on Apple.com and iTunes, provide innovative financing options in the UK, allow people to send and request money on Venmo with Siri and iMessage on iOS 10, and allow merchants to accept Apple Pay transactions, both in-app and on the web, via Braintree. Last June, Apple opened up the ability for developers to integrate Siri into select types of applications. We were certainly intrigued by this and began testing a payment integration with Siri in the following months.”
Money can be a difficult topic even between the closest of friends and family. In 2015, PayPal commissioned a survey which found that more than half the people asked across Australia, Canada, Germany and America found it awkward to ask family or friends to pay them back, and around 55 percent felt embarrassed asking for a loan, no matter how small. The inflammatory subject provokes a feeling of anxiety in many people, meaning that they potentially never receive their money back, potentially leading to resentment and the breakdown of relationships.
“Letting these debts go can have real fiscal and social consequences,” Colbeci says. “Small, unpaid debts between friends may seem easy to forgive when hoping to avoid awkward conversations, but they can leave a sizeable hole in consumers’ wallets. According to our study, adults on average are owed nearly $450, creating a global total of $51 billion. That’s a pretty significant sum. The study also found that nearly 75 percent of people of all ages feel relief at the thought of using P2P payments to settle debts.”
Colbeci’s team at PayPal is focused on making the entire P2P process easier, having created PayPal.Me – a free and easy way to request money from whomever you require which works on all devices – as well as the Siri integration. In 2015, PayPal processed $41 billion in P2P payments across PayPal, Venmo, and Xoom, and P2P itself increases customer engagement on PayPal by 67 percent. PayPal has contributed enormously to the rise of P2P payment, and the innovation thereof.
“The bigger picture for P2P payments is how we’re making it more personal and contextual,” says Colbeci. “You can see this in recent announcements over the last two years from the ability to send and request money through a personalized link with PayPal.Me, in e-mail via Microsoft Outlook, and most recently through voice-activated payments through Siri.
“The P2P industry is at an exciting juncture. A lot of people, especially millennials, don’t like carrying cash so the industry will continue to see exponential growth of P2P payments. Today, a third of US millennials are embracing P2P payments and 42 percent of millennials would prefer to send or request money through a mobile device. For financial institutions to stay relevant to younger consumers, they need to embrace mobile-friendly and cost-effective P2P solutions. With Venmo, we’ve seen that millennials appreciate a social component where people can add comments on what the payment is for.”
While the Siri integration is currently only available with Apple devices, PayPal is always looking for new avenues in which to become involved, and will likely expand to more voice-activated platforms in the future. Colbeci and his team now know the recipe for developing successful P2P services; in his words: “To stay ahead of the competition, a strategy that combines mobile, personal, and contextual would most likely be the winning formula. You’ll continue to see more on this from us.”
Meron Colbeci, Senior Director of Core Consumer Products at PayPal
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What’s Causing the Global Supply Crunch?
As the global economy gradually recovers from the impact of COVID-19 pandemic, worldwide supply crunch is intensifying, spreading not only from one country to another, but also from one industry to another.
A year ago, when the pandemic continued to spread, economies around the world were severely hit and there was panic buying among consumers. Today, it is companies that are trying to go on a stockpiling, buying more raw materials than they need to keep up with rapidly recovering demand. The panic buying is fuelling more shortages of raw materials, including copper, iron ore, steel, corn, coffee, wheat, soybeans, wood, semiconductors, plastics, cardboard, etc. As a result, inventories of seemingly every raw material around the world are running low. “You name it, and we have a shortage on it,” Tom Linebarger, chairman and chief executive of engine and generator manufacturer Cummins Inc., said earlier, and he noted that his clients are “trying to get everything they can because they see high demand”.
Supply shortages have driven prices up significantly, with the impact of rising prices for some key raw materials being significant. The prices of various industrial raw materials such as crude oil, plastics, and chemicals are rising. Some of the impacts of higher raw material prices have already begun to be reflected in consumer goods. Reynolds Consumer Products Inc., the maker of the namesake aluminium foil and Hefty trash bags, is planning another round of price hike, and this will be the third for the increase this year alone. Food prices are also climbing. The price of palm oil, the world's most consumed edible oil, has risen more than 135% over the past year to record levels; soybeans have topped USD 16 a bushel for the first time since 2012; corn futures prices have touched an eight-year high, and wheat futures prices have risen to the highest level since 2013.
Changes in factory orders due to the impact of the pandemic have also tightened supply in some markets and pushed up prices for raw materials. Some knitting enterprises in Dongguan, Guangdong, said that affected by the pandemic, about 40% of the orders have come back to China from countries such as India and Southeast Asian countries, while the factory utilisation rate has increased by about 30% to 40%, and now it has reached 100%. In Jiangyin, Jiangsu, a bedsheet enterprise adjusted its production capacity to accommodate a USD 20 million order from Southeast Asia. Increased demand from the textile industry has led to tight supplies of raw materials. In Wujiang, Jiangsu, where polyester filament yarn is the most in demand, the shortage of raw materials this year has been unexpected, especially in the current off-season, when there is not much stock. In Suzhou, also in Jiangsu, the export of polyester filament yarn increased by nearly 60% from January to April, while the price increased by 40% to 60%. Compared with the same period last year, the price of filament yarn increased by RMB 2000-3000/ton.
Remarkably, this hoarding frenzy is pushing global supply chains to the brink of collapse. Inventory shortages, transportation bottlenecks, and price increases are nearing critical levels, raising concerns that strong global growth could fuel inflation. The supply disruptions in the past are simply incomparable compared to the severe inventory crunch of 2021. Industry insiders predict that both large and small enterprises will be affected by this supply shortage.
Why are current supply shortages so acute?
Researchers at ANBOUND believe that instead of having one single factor, there are multiple reasons for the emergence of complex systemic problems.
First of all, there is the recovery in demand as the pandemic is brought under control. This year, as vaccination rollout efforts have brought the pandemic significantly under control in the United States and some European countries, the economy has begun to show significant momentum for recovery. This trend prompted a near-simultaneous recovery in most markets around the world. The collective recovery of global markets has led to a near-simultaneous increase in demand, exacerbating the mismatch between supply and demand. In the case of commodity futures, the capital was collectively bullish on commodities under such expectations, significantly driving up the prices of commodities (mostly upstream commodities) and spreading to midstream and downstream commodities. It should be noted in particular that the surge in demand for certain specific commodities under the pandemic has also exacerbated the supply-demand mismatch in some industrial chains. For example, the increase in the need of remote, online working and studying has increased the demand for all kinds of electronic products, leading to a surge in global demand for semiconductor chips, which affects several chip-requiring industries.
Another reason is that the pandemic has disrupted the global supply chain system, causing distortions in supply and demand in certain industries, which are transmitted along the supply chain, causing a wider supply crunch. As ANBOUND previously pointed out, the spread of the pandemic has dealt multiple blows to global supply chains. During the pandemic, China, as the "world's factory", was affected by the pandemic and its production side was disrupted. Then, the demand side of developed countries was suppressed by the impact of the pandemic. This is followed by the fact that the malfunctioning of the global supply chain system has exacerbated global supply distortions. To cite an example, the severe shortage of containers due to disruption of the supply chain has exacerbated the global supply distortions.
In addition, enterprises began to collectively increase their inventories, leading to the increase of inventories in the industrial chain and supply chain, amplifying the demand for all kinds of raw materials, intermediate products, and supporting products. In the past, in order to save costs and improve efficiency, many enterprises advocated zero-inventory production and tried to reduce the inventory in the production link, thereby reducing the capital occupation. However, the smooth operation of zero inventory production depends on the efficient global supply chain system. Once a problem occurs in the global supply chain system, it can lead to chaos in the whole supply chain system. The 2011 earthquake in Tōhoku, Japan has caused the shutdown of some key auto parts plants, which once led to the global auto supply chain being affected. Likewise, the global spread of the COVID-19 pandemic since last year has damaged, distorted, and even disrupted global supply chains.
Finally, geopolitical factors have also contributed to the tight supply of global commodities, resulting in the artificial disruption of part of the industrial chain and supply chain. For example, the U.S.-driven crackdown on chip supply to Chinese enterprises and related sanctions have seriously disrupted the global semiconductor industry chain.
How long will the supply crunch last?
Overall, the global supply crunch is due to a variety of reasons, including increased demand from the post-pandemic economic recovery, distortions in global supply chains caused by the pandemic, collective stockpiling by enterprises around the world, and geopolitical disruptions. However, this does not represent a significant expansion of aggregate global demand, but rather a distortion of the existing system as it is disrupted and broken. Judging from the current situation, this tight supply situation will last for a long time, leading to the price rise of raw materials and components. Therefore, both enterprises and governments need to be prepared for this scenario in the medium- and long-term.
Mr. He Jun is Partner, Director of China Macro-Economic Research Team and Senior Researcher. His research field covers China’s macro-economy, energy industry and public policy.