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