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Comment by eggbrain | Hacker News Reader

While Square makes (more) sense to get into the banking game, I've noticed a lot of companies only tangentially related to finance doing similar things, and I wonder what it's indicative of:

- T-Mobile offers an exclusive checking account for their customers

- Credit Karma promoting their own debit card

- Robin hood doing "Cash Management"

- Coinbase offering a debit card with crypto rewards

Has something changed with the ecosystem in the past 5 years? I'm half expecting NYTimes to release a banking/checking account these days where you get rewarded with newspapers.

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Everyone wants in on the game. There's this really big piece of the pie where fees and interest come into play. Every transaction has fees and some people carry balances that generate a lot of money in interest. It's how credit card providers can offer rewards.

At some point in our future we'll probably see the end of these rewards cards because the government will likely regulate it. Which I think is actually a good thing, because it's the people with the least amount of money that are footing the bill for those of us reaping the rewards.

There's also money in selling the transaction data, isn't there?

That's one of the attractive things about the Apple Pay + Apple Card isn't it? I thought I read some time ago that Apple Pay anonymizes the card somehow so that transaction processors can't sell the data. It was for that reason that J.C. Penny stopped allowing Apple Pay as a payment method.

Ah, here's an article from April 2019: https://www.mytotalretail.com/article/j-c-penney-stops-accep...

Its a function of the stability of the bank partnership model and the success of baas apis like galileo, combined with the economics of debit interchange for institutions under the Durbin amendment cap.

Partner banks get more deposits and use their fat interchange rates to attract the developers/promoters of new products.

T-Mobile: helping the underbanked.

The others: profiting from interchange fees. If you can get your card to be “top of wallet” you can get a cut of every purchase a consumer makes. If you are a store, like Target, you can also drastically reduce the processing fees you pay to card issuers by redirecting those funds to yourself.

I self identify as middle class. It was pretty exciting when my wife and I both opened T-Mobile Money accounts and capped out their $3,000 balance for access to 4% APR. Even the 1% APR for additional funds is attractive, as far as a savings account goes, no?

We also use the Target Red Card to save 5% at Target and the Amazon Chase card to save 5% at Amazon.

I don't know if anything has changed necessarily, but anecdotally I think the business model has been validated in a high profile way. Accruing returns on stored money (like RobinHood) has largely supplanted the wave of "fresh take on charging you transaction fees" model of Venmo and Cash App.

White label providers is a thing, there's only a handful of operators doing the actual banking/payment services behind that.

The big change is probably that actual banks' brand value got damaged to the point that people trust banking services with random consumer brands stickers on them more than they used to.

I assume it's because being a bank allows you to invest the deposits and turn a profit.

Banks are also sticky - people don't often switch them, so once you start, its hard and unlikely you'll move. That helps ensure your product stays in use.

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