How money is made.
WHAT THE REVENUE SOURCES ARE
Transaction fees Spread on currency conversion Interest on balances held Interest and fees on lending Subscription fees Interchange share, for issuers Referral and distribution fees
WHAT DETERMINES WHICH WORKS
Volume, margin per transaction, and cost to serve.
WHAT TRANSACTION FEE MODELS REQUIRE
Substantial volume, since margins are thin and compressing.
WHY COMPRESSING
Competition and regulatory caps both reduce them.
WHAT INTEREST ON BALANCES PROVIDES
Revenue proportional to funds held.
WHAT IT DEPENDS ON
Whether you may earn it, and prevailing rates.
WHAT LENDING PROVIDES
The highest margins, with the highest risk.
WHAT SUBSCRIPTION PROVIDES
Predictable revenue independent of transaction volume.
WHAT TO MODEL CAREFULLY
Cost to acquire a customer Cost to serve, including support and compliance Lifetime value Fraud and default losses
WHY COST TO SERVE IS UNDERESTIMATED
Support, compliance and failed transaction handling scale with customers, not revenue.
WHAT MAKES UNIT ECONOMICS WORK
Either high margin per customer, or very low cost to serve.
WHAT TO AVOID
Growth that increases losses per customer.
