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Comment by rb808 | Hacker News Reader

I dont understand how these new startup banks can stay in business. Previously banks could make money on the deposits in check accounts, now with negative rates they can only lose. Even big European banks are slowly dying.

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It's like WeWork. These "fintech" companies are primarily in the business of taking money from giant investors who have too much cash (Softbank, Saudi Arabian sovereign wealth fund etc.)

These investors love to make oversized bets in WeWork-style startups which are actually just tech-colored lipstick on an old unprofitable industry, because it ticks the boxes on their "disruption" checklists.

Yep! These companies have quite deep pockets but they systematically ruin the opportunities for smaller players to make an organic growth.

Most of the "Uber, but for *" startups get funding with these companies, and I don't even feel bad about using their 60% off codes if 8t provides something I'd pay otherwise anyway. When the promotions stop, I stop using the app too.

They make all their money on the "value add" services. Things like insurance, loans, cryptocurrencies, fees for a shiny metal card, etc.

Even so, I can't see how they can afford ~1,000 support agents employed with only ~1,000,000 daily customers. I don't want to pay 0.1% of my income to pay for tech support for my bank account!

1. Pick some established business idea

2. Make it digital

3. Collect VC money

4. Subsidize service / product with VC money, and expand

5. GOTO 3 until IPO pressure starts mounting

6. Pray to god that you've outspent and outlived your competitors when it's time to go public

There are still many ways for banks to make money, and challenger banks are betting on the fact they can do it with less overhead.

Big European banks have started closing down branches and laying off staff, while they were pumping VC money to scale across several countries/continents and acquire a customer base among socio-demographics with high potential (mostly young, tech-savvy, traveling, reasonably good with money). These people eventually grow a bit older and need loans, mortgages, investments...

> There are still many ways for banks to make money

Can you name one?

The sad truth is that it's much easier to make money on people who are less savvy and not good with money. They are less likely to switch, more likely to take a loan or overdraft, and have to pay higher interest rates.

You would be amazed at how much money a bank can make on card interchange (the fee they earn on every card transaction you make).

Also most central banks don’t have negative base rates, so some money can still be earned from deposit interest. But COVID has of course slashed that revenue stream.

> You would be amazed at how much money a bank can make on card interchange

Not in Europe. Do you have any links?

> Also most central banks don’t have negative base rates,

OK not negative, just zero Eurozone is 0%, UK is 0.1%, Scandies are zero or 0.05% https://www.global-rates.com/interest-rates/central-banks/ce...

Not that are publicly available. But I do work in large fintech, and know how much revenue we make from interchange and it way more that you expect.

While interchange in the EU is capped, it’s not zero. And interchange earned from customers travelling abroad in countries with very high interchange rates is quite significant.

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