4 ms·
Europe is known to have really shitty profits from interchange fees. It’s not like North America, where these profits are a bit of a runaway train. We are curre
by jbob2000 6y ago
Europe is known to have really shitty profits from interchange fees. It’s not like North America, where these profits are a bit of a runaway train. We are currently talking about “interchange shrink” because we expect this ride to come to an end soon (aka loyalty programs are about to get really shitty, especially with the collapse of the travel industry)
- toomuchtodo 6y agoFor those who aren't aware, European interchange fees are regulated (In the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards, no cap for corporate cards), which is good IMHO. Banking should be treated as a utility, lending and other services can be the profit center (as you allude to in your comments). Margin compression is a thing for banks who haven't realized yet they're software companies that offer financial services now, and the moat continues to shrink (getting a banking license is hard, partnering with another bank in need of deposits less so). One must be willing to cannibalize margins to survive or be prepared to be left behind by those who are more efficient (and I admit that macro trends make this harder than in the past; "borrow at 3, lend at 6, at the golf course by 3" [1] is dead). Disclosure: Part of my work is helping old banks attempt to turn into software companies, with wildly varying results depending on the org. [1] https://en.wikipedia.org/wiki/3-6-3_Rule https://en.wikipedia.org/wiki/3-6-3_Rule