A big reason the ARK Fintech Innovation ETF (NYSE: ARKF) is higher by 71.32% this year is the growth of digital wallets, such as PayPal's (NASDAQ: PYPL) Venmo and Square… All content is original and has been researched and produced by ARK Investment Management LLC (“ARK”) unless otherwise stated herein. Feel free to change variables to battle test our assumptions and share your thoughts with us. Intentionally, we have not incorporated the potential for Square’s international business, an important call option. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. The job posting has since been taken offline. DISCLAIMER: This web site and its author are in no way affiliated with ARK Invest or Trading 212. Importantly, Venmo and Cash App users have a financial incentive to invite their parents and grandparents onto the platforms, an incentive that did not exist when Facebook and Instagram launched. In July 2020, Square began recruiting for an Italian-speaking customer support position[7] and, in September, Cash App was looking for a European Operations Manager. For both social media and peer-to-peer payment applications, the utility of the networks increases as an exponential function of the total number of people on the network. Historically, Square has focused on building proprietary technology and deep partnerships, taking time to understand markets, rather than blitz-scaling across geographies. Nothing contained herein constitutes investment, legal, tax or other advice and is not to be relied on in making an investment or other decision. [3] For reference, private challenger bank Chime generated $100 in revenue per direct deposit customer, per our estimates. New York, NY 10016 Square’s seller business continues to expand, growing transaction-based revenues at a 19% annual rate through 2025. Other research puts the average revenue per retail bank customer at $413. Cash App Could Be the Fastest Growing Digital Wallet in the US, Venmo vs. Cash App: A Look Inside the Most Popular Consumer Finance Products in the US, Square Cash App’s Viral Marketing Strategy Attracts Users. To foster healthy debate, we have published an extract of our Square valuation model. In the chart below, we describe 10 Cash App monetization scenarios and, holding all other assumptions constant, provide our forecasts of their impact on Square’s stock price. Another week in the books and another week of Cathie Wood and Co. publishing their daily trades. Further, there is no assurance that any strategies, methods, sectors, or any investment programs herein were or will prove to be profitable, or that any investment recommendations or decisions we make in the future will be profitable for any investor or client. Moreover, as a comprehensive Digital Wallet incorporating Square’s seller ecosystem, Cash App could integrate offline and online commerce, distinguishing it from both traditional and challenger banks. 3 East 28th Street, 7th Floor, Additionally, ARK does not have investment banking, consulting, or any type of fee-paying relationship with the subject company. Among them are the four described below. If Cash App can monetize 20% of its US user base at the level of traditional banks today, then with modest growth in its seller business, SQ could return 19% at an annual rate during the next five years, rising from $150 today to $375 per share in 2025. There is no guarantee that ARK's objectives will be achieved. The five industries that could be disrupted by innovation in the coming years. ARK-Invest-Square-Valuation-Extract. While ARK’s current assessment of the subject company may be positive, please note that it may be necessary for ARK to liquidate or reduce position sizes prior to the company attaining any indicated valuation prices due to a variety of conditions including, but not limited to, client specific guidelines, changing market conditions, investor activity, fundamental changes in the company’s business model and competitive landscape, headline risk, and government/regulatory activity. Intentionally, we have not incorporated the potential for Square’s international business, an important call option. The Adviser did not pay a fee to be considered for or granted the awards. Follow @CathiesArk Cathie's Ark is not affiliated with Ark Invest or Cathie WoodQuotes are … In 2025, Cash App monetizes 20% of its estimated 75 million monthly active users (MAUs), its “primary” MAUs, at the revenue per digital user generated at JP Morgan Chase, Bank of America and Wells Fargo on average in 2019. I recently discovered Cathie Wood and ARK Invest and have come away very impressed with their ETFs. In the future, we anticipate that Cash App will offer a range of services comparable to that of traditional banks today, including personal loans, credit cards, mortgages and insurance. Using the average $880 annual ARPU generated by traditional banks as a benchmark for Cash App, we could be overestimating the cross-selling capabilities of banks and underestimating those of Cash App. Certain of the statements contained on this website may be statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. What did Ark Invest buy this week? This material is intended only to provide observations and views of the author(s) at the time of writing, both of which are subject to change at any time without prior notice. We describe Cash App’s innovative marketing strategies in one of our previous blogs. The ARK Fintech Innovation ETF (NYSEARCA: ARKF) is a prime example of an ETF with a slew of tailwinds and many of those are derived from two marquee holdings: Square … For full Award Disclosure please go to our Terms & Conditions page. Square also could lend the bitcoin on its balance sheet, an opportunity that we will discuss in a forthcoming blog. In our view, Cash App offers users the most cost-effective and streamlined products and services in the financial services industry as it builds personal relationships that lead to efficient and effective cross-selling. Square Crypto Unveils the Lightning Developer Kit See Section #2 and #3 Follow @CathiesArk Cathie's Ark is not affiliated with Ark Invest or Cathie Wood Quotes are delayed 15 minutes Graphs, numbers, and charts should only be taken as approximations. In 2025, Cash App monetizes another 20% of its estimated 75 million MAUs, its “secondary” MAUs, at half that rate. For full disclosures, please go to https://ark-invest.com/terms-of-use. Read ARK’s corresponding blog with further explanation of our assumptions and thoughts on Square here: https://ark-invest.com/analyst-research/square-valuation. Wood predicted that a new wave of institutional investors was on the way. Intentionally, we have not incorporated the potential for Square’s international business, an important call option. Forecasts are inherently limited and cannot be relied upon. In 2019 and 2020, however, search activity for Cash App in other states picked up significantly, pointing to user growth in higher income demographics. Already, aiming to serve as their primary spending hub, Cash App has incentivized consumers to sign up for direct deposit with significant “Boost” discounts on goods and services as well as lower interest rates on loans. In Australia, for example, large banks have left rural areas, giving Square an opportunity to partner with smaller institutions and fill in the void left behind. We delineate other potential growth catalysts in the last section of this piece. We also assume that Cash App’s estimated 75 million monthly active users break down into the three groups in 2025: 20% primary, 20% secondary, and 60% unmonetized, resulting in an average ARPU of $260. See sheet “Bank Reference” in Square Valuation Extract on Github. Ten years after launching a revolutionary credit card ‘dongle’ reader, in our view Square still offers sellers the best value proposition. As a result, Cash App’s ARPU could be multiples higher than the $260 modeled in our base case during the next five years. In our view, it is the most durable metric for a bank’s customer base as it is reported by the bank itself and 85.5% of the US population accessed the internet in 2020. Square’s Seller Business: A Superior Value Proposition. If nothing happens, download Xcode and try again. Square could use its seller base as an acquisition channel for new Cash App users by offering its loyalty via Cash App, enabling Square sellers to use Boost as an advertising platform, or facilitating closed-loop transactions between Cash App users and Square seller at lower cost for sellers than standard credit card processing, thus incentivizing sellers to convince more shoppers to transact via Cash App. Likewise, Square Capital originations should double from 2% of GPV to 4%. [1] The net interest income tied to a small subset of customers accounts for the majority of this revenue.[2]. Catherine Wood, the founder of ARK Investment (Ark Invest), believes that many more big firms will be exploring Bitcoin in the coming days. We will welcome all questions, feedback, and constructive criticism. ARK estimates that up to $1 trillion, or more than 40% of the $2.6 trillion in US commercial real estate values, could be repurposed in the shift to online commerce.9 The US has 5-10 times the retail square footage per capita of that in other countries.10 7 ARK Investment Management LLC, “Federal Reserve Economic Data: FRED: St. Louis Fed.” Perhaps most important on the cryptoasset front, Square could build long term shareholder value through its Square Crypto initiative. Ark Invest’s Cathie Wood Says Big Tech Firms Exploring Bitcoin Ark Invest founder and CEO Cathie Wood says she is expecting a new wave of institutional investors to put Bitcoin on their balance sheets. Square Valuation Extract. We will welcome all questions, feedback, and constructive criticism. In emerging markets, Cash App could leverage bitcoin, as explained below. ARK’s statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. The Company specializes in thematic investing and focuses on key areas of disruptive innovation, including genomics, industrial transformation, and the next generation of web development. Square’s hardware and software engage businesses at the point of sale (POS) and consumers with Cash App’s P2P network. If it were to cut out the middlemen and facilitate payments directly between sellers and Cash App users, Square could leave pricing unchanged and almost triple its net take-rate or lower pricing and undercut most competitors. Ultimately, we believe that Cash App will offer a better and more personalized user experience at a much lower cost than traditional banks. Square does not monetize the remaining 60% of Cash App’s MAUs. In contrast, while Visa credit cards impact millions of consumers and merchants, many third parties sit between them, preventing Visa from engaging with either consumer or businesses in real time.[6]. ©2021, ARK Investment Management LLC (“ARK” ® ”ARK Invest”). The author accepts no responsibility for financial decisions made using the information provided by … The convergence of seller and consumer ecosystems, Square is one of the only companies in the world with real-time front-end access to both consumers and businesses. For full disclosures, please go to our Terms & Conditions page. If primary and secondary users each were to monetize at 30% instead of 20%, its price target would approach $500, delivering a 26% compound annual rate of return during the five years ended December 2025. In our view, Square’s ecosystem has tremendous international growth potential, both for sellers and Cash App users. ARK Invest ETFs have delivered huge returns for investors recently. Extension for Visual Studio and try again average revenue per direct deposit customer per... Limited and can not be relied upon building proprietary technology and deep partnerships, taking time to markets! 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