Ask HN: How do companies actually make money with fractional reserve banking?

Posted by miloelias on Monday October 15, 2018 @04:02PM
from the ask-hn dept.

I hear a lot of people talking about how Robinhood and Venmo make money on the cash that's sitting around in their accounts. I know they make money in other ways, but several articles point to this being a large portion of their profit.

I'm curious if anyone is aware of numbers of how much it's worth to a platform to have this type of cash sitting around.

For example, if I have $10,000 in balances sitting on accounts (assuming they are not withdrawing any of it), how much are you able to make per month/year? It seems that treasury bonds yield low single digit percentages per year. Is this the maximum I am able to make? Or are there other ways to leverage these assets?

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Re:Ask HN: How do companies actually make money with fractio... by cimmanom on Monday October 15, 2018 @05:12PM (#18223804)

Arbitrage and short term bets such as high frequency trading and day trading.

The most old fashioned ways for banks to make money on reserves, though, is to lend it - especially moderate-interest loans such as business loans and mortgages. These days, they also can use the funds to back credit card payments, for instance.

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