At a certain size, every business becomes a bank - stable businesses usually get more marginal return from optimizing their capital structure than actual product development.
As someone who has studied financial crashes extensively, I agree with you but worry that we lack the regulations. All these bank-ish companies offering credit cards are having impacts on the money supply (every loan they issue becomes an asset somewhere), and at some point their interconnections with the financial system are going to become a risk. I assume most to all fund their loans with money market borrowing, for example.
Then there's the broader question of whether this is good for productivity. If every company is a financial company, who actually makes tangible stuff?
What do you mean when you say these companies are offering credit cards? Aren't those cards still managed by Visa, Mastercard, AMEX, or Discover? My understanding is that they're just running the rewards system and putting their name on the card.
Visa and Mastercard just operate the network, they do not control the funds or take on any credit risk. Amex and Discover do operate as lenders, and also operate the network.
Right, but what's the risk to the financial system paulusthe was talking about above in an airline partnering with Chase and Mastercard to to offer a credit card? The lender in all cases isn't going to be the airline, right?
When you triple the money supply every couple years what's a few extra trillion here and there?
/s
Hyperinflation is coming, the kind that will be THE central issues for everyones life for awhile. When it happens it won't be these guys fault. I would not blame airlines and home Depot credit cards for the coming hyperinflation, just a symptom of its approach.
How does hyperinflation even work in a country like the United States, in an age like ours?
If you needed a wheelbarrow of cash to buy break at the bakery, it was still true that there was a tiny downward pressure from the baker in that the bread would eventually rot, so he might as well sell it now if they were just shy of the asking price.
If everyone's buying household goods off of Amazon, their pricing algorithm will never be even that much forgiving.
When it last happened here, many workers were still being paid in cash as soon as the timeclock whistle went off on Friday. Now everything's direct deposit, but not necessarily instantaneous. At my last job, the funds were released at midnight that payday, but with the current job for some reason they're not released until the morning (business open, I imagine).
Are people going to starve, because they have the wrong bank and the money's not there for several hours before everyone else's and it has lost too much value?
What makes you think hyperinflation is coming? If anything, inflation seems to have peaked and is now starting to fall. The only way I can see hyperinflation happening is if there’s another major conflict, climate change causes some major simultaneous disasters, or some kind of black swan event like another pandemic. Of course, individual countries might see hyperinflation if they’re mismanaged (e.g Argentina right now) but I can’t see it happening globally except in the cases listed above.
> If anything, inflation seems to have peaked and is now starting to fall.
Before folks make comments about currency still inflating (gerund), let us stipulate that the noun "Inflation" is a positive rate and the rate has recently decreased. Let us all be thankful that there exists some amount of inflation which in a broad sense reflects a growing and dynamic world (how closely remains to be seen) as opposed to deflation.
They're definitely making money: You pay them the full amount of the gift card upfront, in exchange for coffee later. That's an interest-free loan to Starbucks, and these have a monetary value these days!
> They "make" money when you leave a balance on the card.
In many US states, the money interestingly goes to the state in the end when unused, under a common law doctrine that doesn't exist in many other countries:
In that case, there is no breakage income for the gift card issuer, but the interest free loan, together with people's tendency to spend higher total amounts at the same merchant when using gift cards, still makes them an amazing deal to the issuer.
I suspect that there's also a non-negligible benefit being exploited in the form of differences in subjective value between gifter and giftee: In a nutshell, the gifter spends more money than they normally would at a store they frequent, or viewed from the giftee's perspective, they spend "money" at a company they normally wouldn't.
"Directly"? Isn't the point that they get to invest the money their customers add to their cards, for whatever time Starbucks hold it? That some customers also fail to redeem the balance is for them a bonus, but not what the "Starbucks is a bank" comment addresses.
