4 ms·

At a certain size, every business becomes a bank - stable businesses usually get more marginal return from optimizing their capital structure than actual produc

At a certain size, every business becomes a bank - stable businesses usually get more marginal return from optimizing their capital structure than actual product development.

lxgr 3y ago
Not every large business effectively takes customer deposits of that magnitude, though. Starbucks is another good example of one that does (with gift cards instead of points); Amazon might be another.
- purpleflame1257 3y ago
  Starbucks isn't making extra money directly when you load a Starbucks card, though. They "make" money when you leave a balance on the card.
  - eszed 3y ago
    "Directly"? Isn't the point that they get to invest the money their customers add to their cards, for whatever time Starbucks hold it? That some customers also fail to redeem the balance is for them a bonus, but not what the "Starbucks is a bank" comment addresses.
    - lxgr 3y ago
      > That some customers also fail to redeem the balance is for them a bonus Starbucks does not get to keep unredeemed balances indefinitely in most US states!
      - eszed 3y ago
        Oh? I did not know that. What happens to un-redeemed balances? After how long? Regardless, the underlying point remains. They'll profit from the float until whatever it is they have to do happens.
  - lxgr 3y ago
    They're definitely making money: You pay them the full amount of the gift card upfront, in exchange for coffee later. That's an interest-free loan to Starbucks, and these have a monetary value these days! > They "make" money when you leave a balance on the card. In many US states, the money interestingly goes to the state in the end when unused, under a common law doctrine that doesn't exist in many other countries: https://en.wikipedia.org/wiki/Escheat https://en.wikipedia.org/wiki/Escheat In that case, there is no breakage income for the gift card issuer, but the interest free loan, together with people's tendency to spend higher total amounts at the same merchant when using gift cards, still makes them an amazing deal to the issuer. I suspect that there's also a non-negligible benefit being exploited in the form of differences in subjective value between gifter and giftee: In a nutshell, the gifter spends more money than they normally would at a store they frequent, or viewed from the giftee's perspective, they spend "money" at a company they normally wouldn't.
- slavboj 3y ago
  Any large manufacturer or retailer is in the credit business - taking credit from their suppliers and extending credit to their customers.
paulusthe 3y ago
As someone who has studied financial crashes extensively, I agree with you but worry that we lack the regulations. All these bank-ish companies offering credit cards are having impacts on the money supply (every loan they issue becomes an asset somewhere), and at some point their interconnections with the financial system are going to become a risk. I assume most to all fund their loans with money market borrowing, for example. Then there's the broader question of whether this is good for productivity. If every company is a financial company, who actually makes tangible stuff?
- kylebenzle 3y ago
  When you triple the money supply every couple years what's a few extra trillion here and there? /s Hyperinflation is coming, the kind that will be THE central issues for everyones life for awhile. When it happens it won't be these guys fault. I would not blame airlines and home Depot credit cards for the coming hyperinflation, just a symptom of its approach.
  - rcarr 3y ago
    What makes you think hyperinflation is coming? If anything, inflation seems to have peaked and is now starting to fall. The only way I can see hyperinflation happening is if there’s another major conflict, climate change causes some major simultaneous disasters, or some kind of black swan event like another pandemic. Of course, individual countries might see hyperinflation if they’re mismanaged (e.g Argentina right now) but I can’t see it happening globally except in the cases listed above.
    - adolph 3y ago
      > If anything, inflation seems to have peaked and is now starting to fall. Before folks make comments about currency still inflating (gerund), let us stipulate that the noun "Inflation" is a positive rate and the rate has recently decreased. Let us all be thankful that there exists some amount of inflation which in a broad sense reflects a growing and dynamic world (how closely remains to be seen) as opposed to deflation.
  - 3y ago
seanhunter 3y ago
That's not what a bank is or does.

At a certain size, every business becomes a bank - stable businesses usually get more marginal return from optimizing their capital structure than actual product development.

lxgr 3y ago

Not every large business effectively takes customer deposits of that magnitude, though. Starbucks is another good example of one that does (with gift cards instead of points); Amazon might be another.

purpleflame1257 3y ago
Starbucks isn't making extra money directly when you load a Starbucks card, though. They "make" money when you leave a balance on the card.
- eszed 3y ago
  "Directly"? Isn't the point that they get to invest the money their customers add to their cards, for whatever time Starbucks hold it? That some customers also fail to redeem the balance is for them a bonus, but not what the "Starbucks is a bank" comment addresses.
  - lxgr 3y ago
    > That some customers also fail to redeem the balance is for them a bonus Starbucks does not get to keep unredeemed balances indefinitely in most US states!
    - eszed 3y ago
      Oh? I did not know that. What happens to un-redeemed balances? After how long? Regardless, the underlying point remains. They'll profit from the float until whatever it is they have to do happens.
- lxgr 3y ago
  They're definitely making money: You pay them the full amount of the gift card upfront, in exchange for coffee later. That's an interest-free loan to Starbucks, and these have a monetary value these days! > They "make" money when you leave a balance on the card. In many US states, the money interestingly goes to the state in the end when unused, under a common law doctrine that doesn't exist in many other countries: https://en.wikipedia.org/wiki/Escheat https://en.wikipedia.org/wiki/Escheat In that case, there is no breakage income for the gift card issuer, but the interest free loan, together with people's tendency to spend higher total amounts at the same merchant when using gift cards, still makes them an amazing deal to the issuer. I suspect that there's also a non-negligible benefit being exploited in the form of differences in subjective value between gifter and giftee: In a nutshell, the gifter spends more money than they normally would at a store they frequent, or viewed from the giftee's perspective, they spend "money" at a company they normally wouldn't.
slavboj 3y ago
Any large manufacturer or retailer is in the credit business - taking credit from their suppliers and extending credit to their customers.

paulusthe 3y ago

As someone who has studied financial crashes extensively, I agree with you but worry that we lack the regulations. All these bank-ish companies offering credit cards are having impacts on the money supply (every loan they issue becomes an asset somewhere), and at some point their interconnections with the financial system are going to become a risk. I assume most to all fund their loans with money market borrowing, for example. Then there's the broader question of whether this is good for productivity. If every company is a financial company, who actually makes tangible stuff?

kylebenzle 3y ago
When you triple the money supply every couple years what's a few extra trillion here and there? /s Hyperinflation is coming, the kind that will be THE central issues for everyones life for awhile. When it happens it won't be these guys fault. I would not blame airlines and home Depot credit cards for the coming hyperinflation, just a symptom of its approach.
- rcarr 3y ago
  What makes you think hyperinflation is coming? If anything, inflation seems to have peaked and is now starting to fall. The only way I can see hyperinflation happening is if there’s another major conflict, climate change causes some major simultaneous disasters, or some kind of black swan event like another pandemic. Of course, individual countries might see hyperinflation if they’re mismanaged (e.g Argentina right now) but I can’t see it happening globally except in the cases listed above.
  - adolph 3y ago
    > If anything, inflation seems to have peaked and is now starting to fall. Before folks make comments about currency still inflating (gerund), let us stipulate that the noun "Inflation" is a positive rate and the rate has recently decreased. Let us all be thankful that there exists some amount of inflation which in a broad sense reflects a growing and dynamic world (how closely remains to be seen) as opposed to deflation.
- 3y ago

seanhunter 3y ago

That's not what a bank is or does.