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

2 points by miloelias ↗ HN
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?

1 comment

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cimmanom
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.