UK finance watchdog teams up with Nvidia to let banks experiment with AI
LONDON — Britain's financial services watchdog on Monday announced a new tie-up with U.S. chipmaker Nvidia to let banks safely experiment with artificial intelligence.
The Financial Conduct Authority said it will launch a so-called Supercharged Sandbox that will "give firms access to better data, technical expertise and regulatory support to speed up innovation."
Starting from October, financial services institutions in the U.K. will be allowed to experiment with AI using Nvidia's accelerated computing and AI Enterprise Software products, the watchdog said in a press release.
The initiative is designed for firms in the "discovery and experiment phase" with AI, the FCA noted, adding that a separate live testing service exists for firms further along in AI development.
"This collaboration will help those that want to test AI ideas but who lack the capabilities to do so," Jessica Rusu, the FCA's chief data, intelligence and information officer, said in a statement. "We'll help firms harness AI to benefit our markets and consumers, while supporting economic growth."
The FCA's new sandbox addresses a key issue for banks, which have faced challenges shipping advanced new AI tools to their customers amid concerns over risks around privacy and fraud.
Large language models from the likes of OpenAI and Google send data back to overseas facilities — and privacy regulators have raised the alarm over how this information is stored and processed. There have meanwhile been several instances of malicious actors using generative AI to scam people.
Nvidia is behind the graphics processing units, or GPUs, used to train and run powerful AI models. The company's CEO, Jensen Huang, is expected to give a keynote talk at a tech conference in London on Monday morning.
Last year, HSBC's generative AI lead, Edward Achtner, told a London tech conference he sees "a lot of success theater" in finance when it comes to artificial intelligence — hinting that some financial services firms are touting advances in AI without tangible product innovations to show for it.
He added that, while banks like HSBC have used AI for many years, new generative AI tools like OpenAI's ChatGPT come with their own unique compliance risks.
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Associated Press
22 minutes ago
- Associated Press
Electra Wins Audience Prize at WMF 2025 for Advancing Battery Intelligence with AI
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Yahoo
26 minutes ago
- Yahoo
PayPal's Undervalued Pivot
I've been watching PayPal slide from around $90 in early February to under $70 today, and I think the selloff is overdone. PayPal may look like yesterday's fintech story, but under the surface, a strategic pivot is underwayone that centers on product reinvention and margin-focused execution. While headline TPV growth remains subdued and competition from Apple Pay and Google Pay intensifies, PayPal is quietly reshaping its core checkout experience with AI-powered flows, scaling up Venmo monetization, and pushing deeper into higher-margin branded transactions. These aren't just tweaksthey're a calculated shift toward a leaner, platform-driven model that emphasizes profitability over volume. With transaction margins rising and EPS up 23% year-over-year, the company is proving that it can grow earnings despite top-line headwinds. At just 13.8x forward earningswell below its historical averageI believe the market is underappreciating the strength of this transition and the earnings leverage it unlocks. Warning! GuruFocus has detected 3 Warning Sign with PYPL. PYPL Data by GuruFocus I see the heart of PayPal's business in its transactionsabout 60 per account each month on average, a number they're aiming to grow in 2025. Their main moneymaker is that ~3% fee they take on each transaction, so naturally, more spending means more revenue. They also bring in some money from other stuff like interest on balances, subscriptions, and referral fees, but about 90% of their total revenue still comes from transaction fees. That's why management is so focused on boosting total transactions. In 2024, PayPal processed $1.68 trillion in TPVup a huge 165% since 2018which keeps it at the top of the online payments space. But here's the catch: while TPV keeps rising, the take rate (what PayPal earns from that volume) has steadily dropped. It's now down to 1.72%, which is a 5.3% decline year over year. That tensionbetween massive scale and lower cut per transactionis what makes PayPal's model tricky to evaluate. In the latest quarter, we saw this play out clearly. They beat expectations on EPS, which shows their cost discipline is working, but they missed on transaction margin and saw basically no user growth. Venmo monetization is still a bit of a slow burn too. And yeah, take rate pressure isn't going away overnight. But I don't think those negatives outweigh the positives. Branded checkout TPV grew 6% (adjusting for leap day), and the refreshed checkout experience is now live on over 45% of U.S. flowsup from just 30% last quarter. That's a big move. To me, that signals the pivot is working. If they can keep shifting volume toward high-margin branded flows and roll out more of these AI-powered checkout tools, I think they'll hit their transaction targetsand start expanding margins again too. PayPal is under pressure to turn its massive scale into richer profits. They're leaning into Venmo, PayPal Ads, credit products, and AI?powered checkout to lift margins. With a presence in nearly 200 markets and acceptance of 140 currencies, they've built the infrastructure to evolve from a toll booth into an intelligent commerce platform. The upgraded checkout flow isn't just skin?deepit speeds up logins, cuts latency, and showcases BNPL more prominently, which drove BNPL TPV up 20% and monthly active BNPL accounts up 18% YoY. I expect continued focus on BNPL, since users who buy now, pay later spend 33% more and make 17% more purchases. On top of that, late fees and higher interest rates on these plans give PayPal an extra revenue lift. By making checkout smoother and juicier, PayPal can boost TPV and keep customers coming back. Venmo often gets dismissed as a teen?focused P2P app, but I see it as a hidden engine. Since PayPal's $800 million Braintree deal in 2013, Venmo has exploded in popularityespecially for instant mobile transfers. Revenue from Venmo surged 20% YoY last quarter, fueled by over 50% TPV growth in Pay with Venmo and 40% growth in Venmo debit card users. It's morphing into a full?blown consumer wallet, not just a P2P toy. eMarketer expects U.S. mobile P2P users to climb from 170 million in 2024 to 200 million by 2028 (+16%), which should supercharge Venmo's growth. Notably, PayPal turned around its customer?count decline in Q4 '24, ending Q1 '25 with 436 million users (2% YoY growth), largely thanks to Venmo. I think Venmo can become a cash cow and a major TPV driver for PayPal. Under the surface, PayPal's financial foundation is getting stronger. Transaction Expense Rate fell 8 bps YoY to 0.89% thanks to a better product and merchant mix. That pushed Transaction Margin Dollars (TM$) to $3.7 billion (up 7% YoY), outpacing both revenue and TPV growth. Since Alex Chriss became CEO in Q4 '23, TM$ growth has stayed in the high single digits, showing management's ability to grow profitably. Despite just 1% revenue growth YoY, non?GAAP operating income jumped 16% to $1.616 billion, and non?GAAP margins expanded to 20.7% from 18%. They achieved this by cutting costs, restructuring, and reducing headcount, proving that reinvestment is funding high?ROI initiatives like the new checkout and debit card platform. I expect these operating leverage gains to continuedriven by rising transactions per active account, TPV growth from Venmo, and ongoing cost discipline. Free cash flow looked weaker, down 45% YoY to $964 million, but that was mostly timing on European BNPL receivables. Adjusted FCF was $1.381 billion (down 26%), still solid. In Q1 alone, PayPal repurchased $1.5 billion of stock (average price $77), and $6 billion in buybacks over the past 12 months cut the share count by 7%. With the stock trading around $72 (and even touching $57 in April), I expect management to accelerate buybacks, which will supercharge EPS alongside tight cost control. They reaffirmed FCF guidance of $67 billion and $6 billion in buybacks for the yearso I anticipate aggressive repurchases at these levels to drive further upside. PYPL Data by GuruFocus A recent tariff deal with China froze import duties at 30%, easing fears of higher costs for U.S. online shoppers. March consumer spending jumped 0.7% as buyers rushed to lock in current prices, and April inflation came in cooler than expected (+0.2% vs. +0.3% est.). I believe fears of renewed tariffs will keep pushing online spending higher into 2Q '25. Investors should watch May and beyond for consumer?spending dataif it outperforms, PayPal's TPV could surprise on the upside in upcoming earnings. I've been paying attention to which big?name investors are placing their bets on PayPal, and it tells me something important. Ray Dalio (Trades, Portfolio) boosted his stake by over 50%, Paul Tudor Jones (Trades, Portfolio) piled on 184%, and Jeremy Grantham (Trades, Portfolio) added 22%. Joel Greenblatt (Trades, Portfolio) chipped in another 24%, Lee Ainslie (Trades, Portfolio) was up by 26%, and John Hussman (Trades, Portfolio) upped his position by 150%. Even Mario Gabelli (Trades, Portfolio) increased his holding by 14%. Those are serious moves from people known for finding value. Sure, a few managers like Philippe Laffont (Trades, Portfolio) and Cathie Wood trimmed their exposure, but the real heavy hitters are clearly buying the dip. To me, that reinforces the idea that PayPal's current valuation is too low and that insiders see upside ahead. What really gets me excited is that PayPal is already highly profitable, thanks to its global reach, strong brand, and growing user base. Yet it's trading at just 13.8x forward P/Ewell below its five?year average of almost 30x. At the same time, PayPal is still growing earnings: non?GAAP EPS jumped 23% in Q1 2025, and consensus expects about 12% YoY growth in FY '26. That growth is fueled by sustainable shiftsmore higher?margin branded checkout, ramping up Venmo monetization, and pulling back from low?margin Braintree volumes. Those moves lifted transaction margins by 274 bps in Q1 and are driving strong free cash flow. Plus, PayPal has beaten EPS estimates five quarters in a row, including a $0.17 beat in Q1 2025 with nearly 9% YoY EPS growth. If I anchor my valuation on a conservative 17x18x forward P/E, I get a price target between $88 and $94about 2330% upside. And if sentiment improves enough to push PayPal toward the sector median multiple, I think $100+ per share is within reach. Right now the market treats PayPal like a shrinking middleman instead of a lean, growing platformcreating a rare value?investor opportunity in my view. PYPL Data by GuruFocus Another important point that I noted here was that PayPal projects its Non?GAAP EPS to be in the range of $4.95 to $5.10, representing a 6% to 10% growth compared to the FY 2024 figure of $4.67. Based on the stock price at the time of writing, the implied FWD P/E ratio for FY 2025 is thus approximately 13.8x based on the midpoint of the EPS guidance of $5.025. Assuming a midpoint tax rate of 21.5%, the P/EBT ratio stands at around 10.8x, quite close to the 10x EBT threshold in the so?called Buffett's 10x pretax rule. Just to give some context on this rule: EBT is easier to benchmark against bond yields. The best equity investments are bond?like, and when we speak of bond yield, that yield is pretax. So, a 10x EBT multiple provides a 10% pretax earnings yield, directly comparable to a 10% yield bond. As a result, if I buy a business with staying power at 10x EBT and even if the business stagnates forever, I'm already perfectly happy making a 10% pretax return. Any growth is a bonus. The rule is named after Buffett because he paid about 10x EBT for many of his largest, most successful investmentsCoca?Cola, American Express, Wells Fargo, Walmart, Burlington Northern, and more recently Apple. Hence, with a 10.8x EBT multiple, PayPal fits the rule nicely with a pretax yield close to 10% (9.3% precise). As I mentioned, any growth is a plus in my mind when you start with that kind of earnings yield, and I see plenty of growth potential ahead for PayPalwhether by my estimate or the consensus. I think the market's missing what's really going on with PayPal. While everyone's hung up on slow TPV growth and rising competition, PayPal is quietly shifting gears. They're overhauling checkout with AI, pushing harder on higher-margin branded payments, and finally starting to make real money from Venmo. That's a big deal. It's not just business as usualit's a pivot toward a leaner, more profitable model. Even with all that, the stock is still trading at just ~13.8x forward earnings, which is way below where it's been historically. Plus, they've got strong free cash flow and are buying back shares in a smart, disciplined way. To me, that sets up a classic disconnect between what the company's doing and what the market's pricing in. If these changes keep playing outand I think they willsentiment should shift, and I wouldn't be surprised to see PayPal back above $100. At today's levels, I see a lot more upside than downside. This looks like a solid buying opportunity for anyone thinking long-term. This article first appeared on GuruFocus.
Bloomberg
27 minutes ago
- Bloomberg
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