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Comment by ashurbanipal | Hacker News Reader

If a credit card company can make money from me by charging the merchants I use the card with, and the credit card company gets its money for free through bank deposits and the credit card company has decades and hundreds of millions already invested in its underwriting model, how can Tally sustainably charge me less than the credit card company?

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> and the credit card company has decades and hundreds of millions already invested in its underwriting model

lolol so many assumptions!

yeah they are overcharging. Credit card companies would be profitable lending at Fed Funds Rate + 2%

Instead they charge 14-22% no matter what. No matter what the macroeconomic environment is.

Hey, great question. This is Jason (Tally co-founder). Credit card APRs are massively inflated. Here are two points to consider:

A. There is a 500% difference in the likelihood of someone paying back a loan with a 760 FICO score vs someone with a 660 FICO score, but only an 8% difference in APR.

B. "the credit card business continues to be the most profitable bank lending business, with returns more than four times higher than the average return on assets." - Richard Cordray, Director of the CFPB (December 2015)

The bottom line is that banks are significantly overcharging consumers AND have high fixed costs. Because of the technology Tally has built, our cost structure is an order of magnitude lower than banks. This means we can save customers money and be profitable as a business.

Do you guys fear that if big banks start to feel threatened, they will start lobbying to keep the field uneven to their favor?

Leaves me wondering how much inroad is possible to make going against such big (and dirty-playing) actors.

I mean, obviously if you get to that point you must be doing something right, and shaking the big entrenched businesses can sometimes (most of the times? always?) bring good things, so good luck!

Big banks are powerful and we don't take that risk lightly. However, regulators like the relatively new CFPB, are generally on the side of consumers. So as long as we always do right by consumers and don't lend irresponsibly, we have a very good chance of being on the right side of history. That said, we'll take any and all luck you can send our way

500% sounds like a deliberate play with numbers, if the default rates were 2% and 10% respectively, I could choose to call that a 500% difference, or more reasonably, an 8% difference.

cherry picking

i think that's the only way it works

You can probably build a $100m - $1B business that way. You're not going to be cap1 (though cap1 serves lots of customers prime banks won't touch, so they have their own niche).

Also, there may be lots of people who foolishly don't use CUs. If Tally can reach lots of them they'll do well for themselves.

Most of these lending startups are relying on dumb money institutional investors who have been chasing yield in the low interest rate environment.

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