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Speaker 2: We talked about how it's m and a Monday. There
Speaker 2: is some deal making fintech. Sure, why not Visa making
Speaker 2: a purchase, buying Biocatch for two point four billion dollars
Speaker 2: in cash.
Speaker 3: This is a fraud prevention firm. Let's bring in Dick
Speaker 3: sha Gera.
Speaker 2: She is our global fintech and payments analyst joining us
Speaker 2: from San Francisco. So is this a part of the
Speaker 2: business that Visa really needed to bolster that it didn't
Speaker 2: have already. Biocatch shut using artificial intelligence to detect fraud.
Speaker 4: Yes, Hi, Scarlett, always a pleasure to be here. So
Speaker 4: that's a good question, right. Visa actually did to cybersauce
Speaker 4: acquisition in the past, so it's important to understand why
Speaker 4: are they dropping this kind of money for Biocatch. But
Speaker 4: what biocatch actually does it is it evaluates user risk
Speaker 4: before the payment actually happens. It's during the account registration,
Speaker 4: during the log in, during the profile updates and navigation.
Speaker 5: That's what it's new. So the business itself is not new.
Speaker 4: Visa has a risk and security solutions business which actually generates.
Speaker 5: A two billion dollar revenue.
Speaker 4: That's what our estimate is already, and this basically adds
Speaker 4: to it.
Speaker 6: Dick should talk to us about AI in the FinTechs
Speaker 6: and payment space as it relates to fraud. I mean,
Speaker 6: you know that that's always one of the big risks
Speaker 6: in you know, the payment space here. I would think
Speaker 6: AI would be would hance if I'm a criminal, would
Speaker 6: really enhance my ability for fraud? How did the companies
Speaker 6: think about that?
Speaker 4: That's very true, Pauland if you notice, if you read
Speaker 4: the tele's, these card networks are obviously quite ahead of
Speaker 4: the curve in terms of identifying that issue. Right, So
Speaker 4: you're right, AI is actually accentuated fraud. It's a topic
Speaker 4: that is in every bank boardroom. If you think about
Speaker 4: what happened with Methos, the anthropic model, it exposed a
Speaker 4: lot of vulnerability. So financial fraud overall is growing and
Speaker 4: within payments. What was happening is the traditional gateway tools
Speaker 4: that authorize like they struggle with the app scams, which
Speaker 4: is basically when a legitimate user is tricked bioscammer into
Speaker 4: approving a transaction themselves, so they make the credentials device
Speaker 4: and OTP look valid. What companies like these, like biocatchs
Speaker 4: do is that they detect cognitive behavior and indicators of coversion.
Speaker 4: Basically if you're taking a long pause, if there's unusual
Speaker 4: navigation behavior or the phone call patterns during the session,
Speaker 4: and that helps them to prevent So this is preventative
Speaker 4: threatened eeligence as opposed to when you were acting or in.
Speaker 5: The moment of the payment.
Speaker 4: So Visa and MasterCard are both strengthening their aperture like
Speaker 4: to basically address these issues and also help their plans
Speaker 4: with it.
Speaker 2: So they're trying to come up with solutions. As a consumer,
Speaker 2: how would I experience the use of biocatch in preventing fraud?
Speaker 2: Would I not be able to make a purchase or
Speaker 2: am I going to get an alert? How would it
Speaker 2: affect me?
Speaker 4: Yeah, Scarlett, I'm yet to take a look at what
Speaker 4: exactly is the modality of it. But if you were
Speaker 4: to take a cue from what Visa did with cybersauce
Speaker 4: a lot of this happens in the back end. The
Speaker 4: Holy Grail is actually walking a very tight rope wherein
Speaker 4: you approve most or all of the good transactions and
Speaker 4: you block as many of the bad transactions without actually
Speaker 4: blocking the good transactions. So that's what all these companies
Speaker 4: are trying to approve. And authorization rates are one metric
Speaker 4: with which all of the payment companies actually sell their services.
Speaker 4: So they go and boast about their perfect authorization rates
Speaker 4: and minimal fraud rates.
Speaker 5: That's the metric that they're judged on by the merchants.
Speaker 6: I've got at least one Visa car in my pocket,
Speaker 6: so I applaud this deal that can help cybersecurity, so
Speaker 6: diction real quick. Just for Visa, just for example, over
Speaker 6: the last I know ten years, how is their fraud rate?
Speaker 6: Whatever you look at, has it gotten better or worse?
Speaker 6: What's going on out there in the marketplace.
Speaker 4: So actually the metric I would watch for this Paull
Speaker 4: is how are they doing on their revenue side, because
Speaker 4: like I mentioned, this is not just strengthening their own
Speaker 4: internal fraud protection, it actually is generating direct revenue for Visa.
Speaker 4: So to give you an example, Visa is actually creating
Speaker 4: a lot more of this services revenue line, and we
Speaker 4: project that their services business by itself could be about
Speaker 4: fifteen plus billion dollars by twenty twenty seven. That's about
Speaker 4: thirty one percent of their revenue from ten billion in
Speaker 4: twenty twenty five. So the fraud and the risk and
Speaker 4: security solutions itself is doing two billion dollars annual revenue
Speaker 4: run rate right now, and I think they're trying to
Speaker 4: build and catch on this opportunity that has come along
Speaker 4: with increased requirements.
Speaker 5: And by the way, the timing is amazing.
Speaker 4: Because a lot of global regulators are increasingly holding the
Speaker 4: banks libel for social engineering and scam losses. So this
Speaker 4: allows Visa to kind of bring a very monetizable solution
Speaker 4: to sell to financial institutions facing these complies.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 6: Marriott report a second quarter earnings that beat estimates, spooking
Speaker 6: demand threw of high room prices in the US, but
Speaker 6: the stocks down, So I'm guessing their forward guidance wasn't
Speaker 6: that great. Let's check in with an expert on all
Speaker 6: this stuff. Brian Egger, Senior Gaming and Lodging analyst for
Speaker 6: Bloomberg and Tellent just joins us life here in our
Speaker 6: Bloomberg Get Active Brokers studio, no Nantucket office for him.
Speaker 3: Talk to us about Mary. What did they release today?
Speaker 7: So Mary had had an above expected level of revenue
Speaker 7: p available room growth we like to call it ref
Speaker 7: park and they also raised their full year metric as well,
Speaker 7: so there was some second half upside. So I don't
Speaker 7: think they really lower guidance. There may been some expectation
Speaker 7: that the third quarter could have been even higher. They
Speaker 7: got to bump in the second quarter and they'll get
Speaker 7: some of that in the third quarter from the World Cup.
Speaker 7: I mean the we reek spots globally are obviously the
Speaker 7: Middle East, and there were some pockets of weakness, but
Speaker 7: overall quite strong. I think I think the outlook may
Speaker 7: have been people are looking for a bit more, but
Speaker 7: taking a step back, it was overall a pretty positive prints.
Speaker 6: So for these full service hotel groups, like Mariatt High.
Speaker 6: At Hilton, they have like a million brands, right, they
Speaker 6: really segment the market.
Speaker 7: Thirty thirty one if you count Bonvoy from Aria.
Speaker 6: Well, yeah, I'm a bond boy person. I guess that works, right,
Speaker 6: I mean, that's proven to be the way to cut
Speaker 6: this market up.
Speaker 7: Yeah, you know. They and they report separately trends for
Speaker 7: luxury versus mid scale versus limited service, and they've been
Speaker 7: differing a trends since we emerge from the pandemic. But
Speaker 7: it does benefit them to have different segments.
Speaker 3: Overall.
Speaker 7: They skewed a bit more upscale and luxury then let's
Speaker 7: say win them or even Hilton a little bit more like.
Speaker 6: Kyat, so they see I presume the K shaped economy
Speaker 6: out there is that in fact reflected.
Speaker 7: In their results to a large degree, although I think
Speaker 7: increasingly the CEO of Hilton the last quarter used the
Speaker 7: term C shaped, which is interesting because I think what
Speaker 7: you're seeing is upscale luxury is still quite strong, but
Speaker 7: the limited service, which have been lagging in your last
Speaker 7: year or two, is actually coming back really and I
Speaker 7: think we're seeing a bit more strength in that part
Speaker 7: of the business, whether it's you know, whether it's a
Speaker 7: business travel or leisure travel.
Speaker 6: So are these companies like again Marriotta High, Are these
Speaker 6: global companies?
Speaker 7: Yeah, I mean they are, and so when you when
Speaker 7: they disclose the results, you get a picture into what's
Speaker 7: happening in Asia or Middle East, Africa, Latin America as
Speaker 7: well as the US. So they are quite global. It's interesting.
Speaker 6: I think a lot of businesses today that over the
Speaker 6: last decade or maybe even more, we're really investing in
Speaker 6: the Middle East UAE by I mean that Ara.
Speaker 7: And the casinos too. When yes, you know exactly.
Speaker 6: Are they rethinking that?
Speaker 5: Now?
Speaker 6: How are they What are they getting that's over there
Speaker 6: that's not us, don't worry about.
Speaker 7: Yeah, I don't think they're rethinking it. But obviously a
Speaker 7: major tragic world event happens and then it affects their
Speaker 7: overall growth. Like for example, in the second quarter for
Speaker 7: Marriott rev, par in the Middle East is down forty
Speaker 7: three percent, you know, not prizing given the level of disruption.
Speaker 7: I think the expectation is if you get a normalization
Speaker 7: in the geopolitical climate, that that growth will come back.
Speaker 7: But obviously Near Terman has had an effect, and there's
Speaker 7: also been a little bit of a slow down not much,
Speaker 7: but a little bit in new openings in the pace
Speaker 7: of net unit growth or room growth because of some
Speaker 7: opening or construction delays in the Middle East as well.
Speaker 6: Interesting, how about here in the US, what's the industry
Speaker 6: doing capacity wise or are we still are we building
Speaker 6: new hotels? Are referring existing ones?
Speaker 5: What's going on?
Speaker 7: There's kind of a mid single digit rate of overall growth. Now,
Speaker 7: some of that is new construction. Some of that, and
Speaker 7: it's true in the case of Mariotte and Hilton comes
Speaker 7: from conversions, you know, so you basically get non branded
Speaker 7: Hilton branded hotels are not marribranded, and so some of
Speaker 7: that moroom growth of some conversions and not necessarily new
Speaker 7: ground up construction.
Speaker 6: All Right, it's been i don't know ten twenty years
Speaker 6: of the airbnbs of the world. How is it all
Speaker 6: shaken out with that segment. I'm not sure what the
Speaker 6: term is for the airbnb part of the world versus hotels.
Speaker 7: Yeah, I mean, first of all, remember some of these
Speaker 7: entities have the equivalent of a you know, vacation ownership
Speaker 7: type interest type of experience, and you know, I think
Speaker 7: for a price sensitive short term bookings window wizure customer
Speaker 7: had some effect on the margin, but I think the
Speaker 7: overall perception is that the leisure consumer and traveler, particularly
Speaker 7: for you know, high end stays, has been really resilient.
Speaker 7: And that's kind of the sweet spot of a Mariotte because.
Speaker 6: I see, like you know, some of these court by
Speaker 6: marriage or some of the over ends. I mean they
Speaker 6: are dominated by travel teams. You pull into there and
Speaker 6: then you know, like twenty seven lacrosse teams or ice
Speaker 6: hockey teams. That's a part of the business that didn't
Speaker 6: exist a while ago.
Speaker 7: I mean, it's a different type of experience and travel
Speaker 7: purchase obviously if you're looking at a vacation ownership or
Speaker 7: a home renting for short term, but it does not
Speaker 7: seem to have detracted in any way for the overall,
Speaker 7: weizure travel strength.
Speaker 6: That's amazing because you think about all the Airbnb inventory
Speaker 6: that's come on to the market.
Speaker 7: I mean, at one point we thought are individual consumers,
Speaker 7: certainly we'll choose one over the other, But overall, I
Speaker 7: think it represents a very neat segment of the market.
Speaker 3: So stay with us. More from Bloomberg Intelligence coming up
Speaker 3: after this.
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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
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Speaker 6: I thought we were going to come in potentially for
Speaker 6: another farmer merger Monday.
Speaker 3: Sure, I'm not sure that's gooding.
Speaker 2: We've got some noise, but a lot of noise because
Speaker 2: you have the UK drug maker Astrazenica in talks reportedly
Speaker 2: to combine with US rival Bristol Myers.
Speaker 3: If they combine, this.
Speaker 2: Would be a deal valued at almost four hundred billion dollars.
Speaker 6: But I don't know if it's a deal or not
Speaker 6: a deal. So let's check out somebody who follows this
Speaker 6: stuf for a living. Sam Fazelli. Uh he is. I
Speaker 6: don't know what his titles, but he's just the top
Speaker 6: drug bosses shaking his head, pharma analyst in the city
Speaker 6: of London. Sam talkers, You've known Asseneca and brister Miles
Speaker 6: squib of Prince in New Jersey for decades. Here, what
Speaker 6: do you think about a potential type of these two companies?
Speaker 8: So Paul and Scola go into your terminal and ask
Speaker 8: me and type what has Pascal Soio, CEO of Astenka,
Speaker 8: said about nego mergers negative negative negative negative negative? How
Speaker 8: is this credulous? What happened since the results that came
Speaker 8: out recently and the last time the CEO said this?
Speaker 8: So I'm going to speculate here right, all speculation. This
Speaker 8: is FT saying, which of course is a very credible source,
Speaker 8: that perhaps there have been some discussions and maybe on
Speaker 8: some segment to be put together cardiovascular oncology or call
Speaker 8: it operation, on an area where they could collaborate the
Speaker 8: merger together. Why would you do that if you'd be
Speaker 8: telling us the story just a few days ago at
Speaker 8: the Q two that we have double digit growth Ernie's
Speaker 8: growth to twenty thirty, and then go and buy yourself
Speaker 8: a company that's got flat or negative earnings growth potentially
Speaker 8: depending on how quickly these patent experience hit Bristol Myers.
Speaker 8: Why would you do that? In which corporate finance book
Speaker 8: does that make sense?
Speaker 2: I guess part of this is that Astra Zeneca, which
Speaker 2: is listed of course in the UK, a member of
Speaker 2: the Footy one hundred, completed a direct listing in New
Speaker 2: York this year and maybe that got people thinking that
Speaker 2: it has greater ambitions in the US.
Speaker 3: And I hear what you're saying about how.
Speaker 2: There might be specific partnerships with BMY, But how did
Speaker 2: that direct listing in New York get people talking and
Speaker 2: thinking about what its ambitions could be.
Speaker 8: I think there's a little bit of effort going on
Speaker 8: by all pharma companies to show how US friendly they
Speaker 8: are because of all the obvious conversations that have been
Speaker 8: going Some of it is sincere, some of it is not. Also,
Speaker 8: I think it's a signal to the Europeans and the
Speaker 8: UK specifically saying your environment is not great for research
Speaker 8: the US is some of that's going on. But as
Speaker 8: Zenica is already an international company, they've had no problem
Speaker 8: growing their business in the US, in China, in Asia,
Speaker 8: in any other country that they want to. So really,
Speaker 8: I don't buy that story that this is geographic to
Speaker 8: get a better foothold in the US. And if you
Speaker 8: really want that, at least get go after something that's
Speaker 8: complimentary as opposed to exactly the same build business area,
Speaker 8: which would cause quite a lot of questions at least
Speaker 8: whether it's real or not on the anti trust side
Speaker 8: of things.
Speaker 3: Yeah, I just I don't buy it. I don't buy it.
Speaker 8: I think there's something else maybe going on, but I
Speaker 8: don't buy the full merger.
Speaker 6: I mean, is there a sense that if you're ever
Speaker 6: to want to get a deal of this size done,
Speaker 6: you do it with this well this administration is in office?
Speaker 6: Is that maybe just feeling us a little bit?
Speaker 7: Maybe?
Speaker 8: Maybe, but again, going to do something that's secretive not dilutive.
Speaker 8: I mean, you know, it would take them, It would
Speaker 8: take the everything that Pascal has already been saying, we
Speaker 8: take their eyes off of the pipeline. It would cause
Speaker 8: a huge amount of consternation within the companies, people wondering
Speaker 8: whether they have a job or not in a year.
Speaker 8: What do you think happened. We've been around long enough
Speaker 8: to know these mega emergency from it don't tend to
Speaker 8: work unless you have a massive patent clip coming up.
Speaker 8: You merge two pattern clips here, they get even worse.
Speaker 8: I just doesn't make sense, you know. Ockham's raiser simple
Speaker 8: answer is it doesn't make sense.
Speaker 3: It doesn't make sense.
Speaker 2: But if you mentioned something about how Bristol Meyer's scribe
Speaker 2: has seen flat growth, why why is it such a laggard?
Speaker 2: What is it having trouble doing right now? And does
Speaker 2: it need someone to buy it out.
Speaker 8: It doesn't need someone to buy that. They do have
Speaker 8: what they need to get to the Greek growth or
Speaker 8: the or the re startup growth. The thing is they're
Speaker 8: suffering from what all former companies at some point patent expirers,
Speaker 8: which is great for consumers. We forget all that. They
Speaker 8: go and invent drugs, spend billions developing them and creating
Speaker 8: a market, improving that drugs are good and safe, et cetera,
Speaker 8: and then twelve years or ten years in they become generic.
Speaker 8: People you can buy them for by a tenth of
Speaker 8: the price or if not less. So that's what's happening
Speaker 8: in Bristol Myers. A couple of drugs are going off
Speaker 8: patent that they're dealing with that they have a pipeline
Speaker 8: that's developing. I want to point to a podcast I
Speaker 8: did on our Angles of Healthcare Podcasts with the head
Speaker 8: of Oncology, Christian Message c from bms A Bmy. You
Speaker 8: going and listen to that. You hear a lot of
Speaker 8: great stuff going on in the company.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
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Speaker 2: On Friday, New York State sued Calshie for running allegedly
Speaker 2: an illegal, unlicensed gambling operation in the state. Right They're
Speaker 2: basically saying that Calshi's prediction market exposes New York State
Speaker 2: residents to serious personal and financial risk, and that the
Speaker 2: company did not seek a license from the New York
Speaker 2: State Gaming Commission. That gets to the heart of the
Speaker 2: matter here with prediction markets and whether they're gambling or
Speaker 2: something else, And so the discussion continues. The debate continues.
Speaker 2: Jonathan Kay is founder and CEO of Aptopia. He joins
Speaker 2: us right now from Boston. Jonathan, different states have different
Speaker 2: points of view on this. We know the federal government
Speaker 2: looks at prediction markets and says it's okay, just give
Speaker 2: us the lay of the land right now in terms
Speaker 2: of how much market share prediction markets have taken when
Speaker 2: it comes to sports betting, or in this case, the
Speaker 2: terminology they use as events contracts.
Speaker 9: Yeah, well, Paul and Scarlett, thank you so much for
Speaker 9: having me nice to be here today. Generally, what we're
Speaker 9: seeing is, I think we're here today because we've seen
Speaker 9: prediction markets daily active users, right, the amount of people
Speaker 9: that go back to the app each day actually start
Speaker 9: to meaningfully surpass those of online sports books often known
Speaker 9: as DraftKings and FanDuel. And what you've seen is actually
Speaker 9: since the Super Bowl, the last like kind of four
Speaker 9: or five months, you've seen parody. So you've seen DraftKings
Speaker 9: and FanDuel and Calshi kind of be in a dog fight,
Speaker 9: frankly in terms of daily active users, which I think
Speaker 9: for people that are avid gamblers or avid investors in
Speaker 9: this space. Super Bowl to now is kind of a
Speaker 9: slow period. So we were looking to see what would
Speaker 9: come out of the World Cup, and what you saw
Speaker 9: was like the dog fight break up, right. You saw
Speaker 9: Calshi essentially grow to be materially larger in terms of
Speaker 9: daily active users than the sports books and polymarket kind
Speaker 9: of come out of this tier two positioning and now
Speaker 9: enter into the dogfight with DraftKings and sports and fandom.
Speaker 6: So is it easier less expensive? Why are people going
Speaker 6: from the online sports books to these prediction markets? Are
Speaker 6: these prediction markets easier to use cheaper to use. What's
Speaker 6: driving it?
Speaker 5: Do you think?
Speaker 9: Yeah, it's a really really good question, And so we
Speaker 9: beat up three angles guys. So we looked at is
Speaker 9: it the location of the user, because there's states where
Speaker 9: it's legal and non legal. Is it the demographic of
Speaker 9: the user, the age or the gender, or is it
Speaker 9: something specific to an event where like an elections or
Speaker 9: Love Island which is ridiculously popular. Is that driving the activity? Right?
Speaker 9: And what we saw is that location, whether you're in
Speaker 9: a state that you can legally use DraftKings and fend
Speaker 9: or not, was really not a contributor to activity at
Speaker 9: all during this low period. Then we saw non legal
Speaker 9: states be a significant driver of activity to cal She
Speaker 9: and polymarket during the World Cup. So I would say
Speaker 9: the first thing is that you have somebody who's in
Speaker 9: a state where they don't think sports betting is legal.
Speaker 9: And even though DraftKings and FanDuel have like snuck prediction
Speaker 9: markets into their app, I think the perception is, hey,
Speaker 9: I'm going to state that it's not legal. I'm not
Speaker 9: doing that cal She is this thing I heard is okay,
Speaker 9: so I'm gonna do it right. And so location was
Speaker 9: a big driver and and frankly, gender was a huge driver, right.
Speaker 9: I think it's it's probably widely understood that male like
Speaker 9: young males pretty much dominate like a sports betting industry.
Speaker 9: What that means in number sense is that twenty two
Speaker 9: percent of FanDuel and DraftKings users are female all shee
Speaker 9: that number is up to thirty two percent. That is
Speaker 9: a material shift. That's a whole new tam that it
Speaker 9: opened up.
Speaker 3: How did it do that?
Speaker 2: How did Calshi and prediction markets like a polymarket manage
Speaker 2: to find their way to female users so quickly?
Speaker 9: Yeah, I think like we talk a lot about politics
Speaker 9: as like a big driver, and we talk a lot
Speaker 9: about well, I can kind of gamble on SNP five
Speaker 9: hundred reportings on there. But the reality is that there's
Speaker 9: a lot of social gambling, right And just like there's
Speaker 9: fantasy leagues for Love Island today and all these like
Speaker 9: dating shows. It just creates a surface to both look
Speaker 9: there and potentially gamble there. And I think once we
Speaker 9: get into in a couple of minutes, maybe the competitive story,
Speaker 9: I think there's a big there's a bit The story
Speaker 9: lives in how deep you go versus how wide you go?
Speaker 9: But I think they've made it fun and if you
Speaker 9: talk to a Calshi user, Scarlett, you'd see that it's
Speaker 9: a non intimidating interface that doesn't feel like I'm doing
Speaker 9: some gambling, which is, you know, kind of black like
Speaker 9: not viewed as well.
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