The microeconomics of e.g. a checking account are *brutal.* It’s like selling $12 a month SaaS with a yearly OpEx of about $120 per account. That math should be terrifying.
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Plausibly someone wins here! But they probably win by accepting the same trade off as legacy financial institutions: “People are unwilling to pay for our best services so either we figure out how to charge someone other than the customer for them or we use them as lead gen.”
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So that begs the question—why are so many startups entering this space?!
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Capital and hope.
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Is “loaning on a fractional reserve” the tweet-sized answer to “so, what makes the money then?”
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I agree, but on the flip side if they were entering the more profitable, regulated and competitive markets, they might have impossible fights. If they can grow audiences sufficiently large and take banks customers, they might become the best middlemen to sell services.
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