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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    1. Patrick McKenzie‏ @patio11 22 Dec 2019
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      33/ Geeks who grok this the first time often think of deposit pricing as being, if not outright theft, theft-adjacent, but partly it's tradition for how financial services are priced and partly it is a progressive cross-subsidization of some customers by others.

      2 replies 3 retweets 38 likes
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    2. Patrick McKenzie‏ @patio11 22 Dec 2019
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      34/ One of the issues in finance to have an opinion on is whether increasing velocity of money, and ease of allocating it via a swipe (or, in B2B, by a computer doing it for you) will cause most deposits to migrate to cheap-to-the-customer places or not. Not obvious, either way.

      2 replies 4 retweets 43 likes
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    3. Patrick McKenzie‏ @patio11 22 Dec 2019
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      35/ Maybe zooming one level back for comprehensibility purposes: There's a risk-free rate for deposits. Your bank or brokerage doesn't give you that. They give you a much smaller number. The spread is deposit pricing.

      4 replies 4 retweets 61 likes
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    4. Patrick McKenzie‏ @patio11 22 Dec 2019
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      36/ "What are you paying for with deposit pricing?" I don't know, what are you paying for with software? The engineers or the person who will answer your email or the beautiful pixels on the website or the person awake at 3 AM to deal with security issues?

      1 reply 3 retweets 43 likes
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    5. Patrick McKenzie‏ @patio11 22 Dec 2019
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      37/ But different firms can allocate the bill differently, via pricing, and so it matters *quite a bit* if you think that customers and businesses discover price sensitivity in deposits in the next 10 years, because that implies that the price of non-deposit services is going up.

      1 reply 3 retweets 37 likes
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    6. Patrick McKenzie‏ @patio11 22 Dec 2019
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      38/ I used to be freaking mystified why it seemed like all the banks went out of small business lending at traditional rates after the 2008 financial crisis, and would only offer credit on credit cards to that segment.

      1 reply 2 retweets 28 likes
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    7. Patrick McKenzie‏ @patio11 22 Dec 2019
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      39/ This is *essentially* a pricing decision, with some regulatory background. Non-intuitively, a bank would far prefer to give you access to a credit line at 9% APR if you access via a credit card than a 9% APR unsecured line of credit.

      1 reply 3 retweets 43 likes
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    8. Patrick McKenzie‏ @patio11 22 Dec 2019
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      40/ The reason for this is that the credit card would generate interchange revenue, which effectively acts as a kicker to the APR (potentially a 10%+ kicker depending on your behavior!). I never understood that when I was on the customer side of credit cards / loans / etc.

      1 reply 3 retweets 75 likes
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    9. Patrick McKenzie‏ @patio11 22 Dec 2019
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      41/ Here's that complexity again. This is a bank relying on a four-party agreement between them, a credit card brand, a supplier, and a small business to facilitate what a lot of people think is the #2 reason banks exist, to provide loans to businesses for cash flow needs.

      2 replies 1 retweet 34 likes
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    10. Chip Koziara‏ @chipkoziara Jan 25
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      Replying to @patio11

      @patio11 In this example, who is the supplier? Is it the merchant the small business is buying from? This thread is fascinating — thank you for sharing all of this!

      1 reply 0 retweets 0 likes
      Patrick McKenzie‏ @patio11 Jan 26
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      Replying to @chipkoziara

      The restaurant is the small business (end-user of credit) and the hardware store is their supplier.

      5:17 AM - 26 Jan 2020
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      • Chip Koziara Michael(マイケル)@Sydney 3/14-???
      1 reply 0 retweets 2 likes
        1. Chip Koziara‏ @chipkoziara Jan 26
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          Replying to @patio11

          Makes sense, thank you!

          0 replies 0 retweets 2 likes
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