Nice article - one thought I had on the opportunity around cutting into the interchange banks are taking is well, is that so great an opportunity? As the banks compete very aggressively for customers with cash back offers etc which chew into those interchange profits. Looking at Capital One's most recent earnings supplement (they are largest bank issuer it appears, or at least one of the largest), their non interest card earnings is about ~$1b/quarter over the last year. However the non interest expenses are $2 to 2.3b / quarter! Obviously this doesn't break down the granular details but it seems like there is a good chance the interchange revenue is actually a loss leader to generate credit card interest income, which is around $3b/ quarter. So I'm wondering if this opportunity may prove to be a very tough nut to crack, as consumers are actually capturing much of this value here in the form of credit card rewards etc, and therefore the incentive for the average person to switch to a new platform may be low. Not to say there aren't other interesting opportunities Lithic can target, but TAM may be far smaller unless they can break into B2B, which does feel very ripe for disruption given backwards ACH/check payments.
This was another good one though it was sponsored! :)
- with regards to modularized sponsor bank > it one thing to allow the client/brand/fintech to pick their own sponsor bank BUT can you throw some light on - how often these clients/brands/fintechs actually find a need to change sponsor bank after a ceratin time? meaning I as a brand start w/ sponsor bank 1 but after a couple of years, is there and will there be needs to change the sponsor bank and does Lithic support that?
- also was wondering if you can write an essay/article on brands issuing co-branded cards unlike fintechs, neo-banks and anya ssociated data and challenges?
Lithic is clearly going to be a major disruptor. I suspect Lithic will itself be disrupted (albeit not for a while) by Lightning based businesses such as Strike. What are your thoughts Packy?
The biggest takeaway is Square is a monster: 80bp!
Nice article - one thought I had on the opportunity around cutting into the interchange banks are taking is well, is that so great an opportunity? As the banks compete very aggressively for customers with cash back offers etc which chew into those interchange profits. Looking at Capital One's most recent earnings supplement (they are largest bank issuer it appears, or at least one of the largest), their non interest card earnings is about ~$1b/quarter over the last year. However the non interest expenses are $2 to 2.3b / quarter! Obviously this doesn't break down the granular details but it seems like there is a good chance the interchange revenue is actually a loss leader to generate credit card interest income, which is around $3b/ quarter. So I'm wondering if this opportunity may prove to be a very tough nut to crack, as consumers are actually capturing much of this value here in the form of credit card rewards etc, and therefore the incentive for the average person to switch to a new platform may be low. Not to say there aren't other interesting opportunities Lithic can target, but TAM may be far smaller unless they can break into B2B, which does feel very ripe for disruption given backwards ACH/check payments.
This was another good one though it was sponsored! :)
- with regards to modularized sponsor bank > it one thing to allow the client/brand/fintech to pick their own sponsor bank BUT can you throw some light on - how often these clients/brands/fintechs actually find a need to change sponsor bank after a ceratin time? meaning I as a brand start w/ sponsor bank 1 but after a couple of years, is there and will there be needs to change the sponsor bank and does Lithic support that?
- also was wondering if you can write an essay/article on brands issuing co-branded cards unlike fintechs, neo-banks and anya ssociated data and challenges?
Very interesting! May be a good fit for Cannabis merchants using non bank.
loudcloud : opsware :: privacy.com : privacy.com + lithic
Lithic is clearly going to be a major disruptor. I suspect Lithic will itself be disrupted (albeit not for a while) by Lightning based businesses such as Strike. What are your thoughts Packy?