I have some reflections on optimization-economics on SN:

• “On the Economics of Peer-to-Peer, pt 2: The Stubborn Issue of Indexation”
• “On the Economics of Peer-to-Peer: I Tried Vexl”

…and another, recently, about Invity #1604577 — the Czech-based fintech/bitcoin-savings vehicle that’s making some serious noise this side of the pond — and doing what’s good for a customer. (To recap that one, they have sleek marketing and a nice array of products and offerings to help Bitcoiners stack, and good, transparent fees... except the hidden spread, which is outrageously large.)

Look, I understand that under ruthless dog-eats-dog capitalism, businesses are under no obligation (morally or legally) to be good to a customer… other than, you know, it being in their long-term interest of forging lasting relationships and other such nice trust/extra-market things.

What I don’t understand is why businesses sometimes try to sneak their customers and pull a fast one on them. How is that going to endear me to you? Isn’t it better to do that is good so that I come back for more?

Standard philosophy setting is you sit down at a random normal restaurant and, without checking the fine print of the menu, order a beer and a burger... and then have a heart attack when the bill arrives at $1,000. Reasonable? Your fault? You didn't check the menu, silly! It clearly states that sit-in customers (on a full moon??) with beer and burger pay standard $1,000) https://stacker.news/items/1598123, #1586158

To quote Sam Rogers (Kevin Spacey) in Margin Call: “You will never sell to any of those people ever again” and later: “you damn well know that you don't make a sale unless you think the guy is gonna come back for more, and tomorrow we are done.”

An exchange or marketplace, for instance, is in the business of matching buyers and sellers (#1603314). Yes, there are TX fees; yes there are all manner of accessory services they can sell and fees (“connection or setup costs”) they can charge dealers or banks or traders… and, importantly (#1604577) a buy-ask spread.

To briefly bring everyone up to speed: When you buy an asset on a marketplace or from a dealer, you pay slightly above its current market price, say $100.25 if the thing is trading at 100; when you sell it back to that same marketplace or dealer, at a neat little 10% pop profit perhaps, you pocket $109.75. The dealer lives on that small difference, since all they do every day is sell and buy to everyone.

Today I was in the closest town. I had some leftover dollars from the summer, and it was finally time to deposit them in a bank that takes (FX) cash. I have done this before and I have a USD account with them. Exchanging them for local currency at my convenience later usually costs me a small, immaterial spread (0.5% if I recall correctly). Today, I also had some local currency in cash, so I thought I’d deposit them in the regular current account at the same time. When the teller asked me, “Deposited straight into current account?” I didn’t think much further and just responded, “Yes.”

Little did I think that this meek, silly, foreign-language affirmative would cost me some $3.

Because when I stepped outside and looked at the receipt, the exchange rate the lady had used was not the neat little 1.5%-ish pop that the DXY had so gracefully given us this week… but a rate 4.4% below market. So had I clarified that I wanted these USD to sit in USD, at the USD account, and me exchanging them once I got home, I would have paid a ~4% smaller spread.

Now, this wasn’t any extra service or special benefit to me, but a clear cash grab. And the annoying bit is that the bank already makes money off its regular spread... Why do you get to take another 4% because I accidentally said "Yes" at the counter and you clicked the button instead of me? That's not work, that's not value add.

I don’t understand why this is a thing? And if it’s a pure customer-inattention cash grab/punishment, why isn’t it 10%? 15?

I can get unreasonably annoyed over things like this… annoyed at myself, annoyed at the world, annoyed at the person/company on the other side of the transaction.... (I think I wrote about this on SN somewhere, #1463559, #1598194).

Background: Revolut, the European fintech wonder (that earlier this year blocked my account for two weeks on unfounded money-laundering slip-ups… #1417296) gives me some amount of made-up points for every purchase — the spending of which I then feel saddled to optimize for.

When turned into discounts in their own Booking.com-like accommodation service, they have some fiat-money value; when transferred to airlines I regularly use, they have a different (and ever-changing) value — usually in the range of 0.5-2% of the initial spend necessary to “generate” the points.

For every Revolut Stays (#1463559) or airport lounge access or RevolutPay Uber ride, Revolut offers to exchange some of their made-up points for discounts.
(Recently, I was offered three levels of 0.6%, 0.8% and 1.2% “returns” on redeeming my discounts. I also have the recurring options of turning them into miles at my regular airlines — SAS #1613346, Icelandair, Finnair — where I’m giving their shitcoins to redeem for discounts on airfares. Usually, these are worth around 0.2%-0.6% of the transaction value necessary to obtain them.)

A few months back, I ordered an Uber and clicked through everything superfast, since I had to make it to a train station in time. From the corner of my eye, I noticed that there was a “Revolut Pay: 10x” payment option, but I was concerned with catching my train so I ignored it. Turned out, this was another avenue in which Revolut has been trying to get into the (very lucrative!) payment business, and to get their customers to help out, they “bribe” them with 10x the regular amount of make-up points. I lost out on my €25 spend, and could have netted a neat 5%-ish benefit if I had had my wits about me and not been stressed.

The point is that while the “loss” was minor, it annoyed me for days.

At least in this story, our incentives are aligned: Revolut wants me to pay with their preferred payment option rather than resorting to Mastercard/Visa; my local bank, however, wants to grab as much and as juicy fees as possible.

I dunno, man.

No good solution, no smart econ insight. Just healthy venting and metaphysical little question of why we don’t all get along and help each other out? #1559053 #1552045