The War That Banks Don’t Know They’re Fighting
Happy Friday, Fintech Takers!
I hope you have big plans for the Labor Day weekend. My kids will be enjoying their last weekend of the summer, and I will be enjoying the last weekend before the fall fintech travel season begins. I’ll also be rooting for the Montana State University Bobcat football team, which is playing its first game of the season tomorrow.
We’ve published lots of great content this week (here, here, here), so I’m not going to overburden you today. Just a quick rant on a topic that’s been bugging me lately.
I hope you enjoy it.
- Alex
The War That Banks Don’t Know They’re FightingCopy anchor linkCopied
Earlier this year, I wrote an essay about what I believe is the single biggest threat to consumers’ financial health: gambling.
In that piece, I explained how certain companies are blurring the lines between investing and gambling, and why confusing those two concepts is extremely dangerous for consumers, especially young consumers.
The feedback that I got on the essay was mostly positive. Bankers (which, for the purposes of this essay, I’ll define as those who work at banks, credit unions, or mainstream neobanks) generally agreed with the central thesis (excessive speculation in financial services has the potential to wreck consumers’ financial lives), but their agreement felt more philosophical than it did tangible. It felt the same way it does when two old people complain about kids these days. A lot of tsk tsk-ing, but with no real desire or intention to take action.
Bankers may not like the rapid growth of sports betting, memecoins, and prediction markets, but they also don’t seem to view it as their problem. The way I know this is that when I ask them what they’re planning to do about this surge in speculative “investing”, they mostly just shrug their shoulders.
And when I suggest potential solutions — a predictive model built on cash flow data that can identify early signs of problematic gambling, or a tool that automatically and instantly transfers a large portion of consumers’ gambling winnings to a savings account or a mutual fund — they get this slightly horrified look on their faces, and they reply in a low voice, “It’s the customer’s money. It’s none of our business what they choose to do with it.”
[OK, let me pause for a second, take a deep breath, and state this next part as calmly as I can.]
IT IS YOUR BUSINESS. YOU ARE IN THE BUSINESS OF HELPING CONSUMERS STORE, TRANSFER, BORROW, AND GROW THEIR MONEY. IT IS LITERALLY YOUR FUCKING BUSINESS!
Whenever I discuss financial health with bankers, this is what drives me crazy. I’m not asking you to care about this out of a sense of altruism or some misguided paternalism.
Focusing on improving your customers’ financial health isn’t altruism or paternalism; it’s capitalism. Cold, ruthless, selfish capitalism.
Bankers are in a war that they aren’t even aware of.
And the enemies in that war aren’t hard to identify. We can name them. They are Robinhood, Coinbase, Kalshi, Polymarket, FanDuel, and DraftKings.
These companies are siphoning away your deposit and investment dollars (one study found that every dollar spent on sports betting reduces net investment by $2.13). They are driving your customers deeper into credit card debt and causing them to overdraw their checking accounts more frequently (Editor’s Note — Technically, these behaviors could generate more revenue for certain banks, but it’s painfully obvious in 2025 that punitive business models like overdraft are going out of style.) They are reducing your customers’ ability to make on-time payments on the loans that you have given them, and they are causing your ACH dispute rates to spike (buyer’s remorse on bad bets is a well-known cause of friendly fraud in the pay-by-bank world).
And you know what? These companies aren’t content to simply be an outlet where your customers choose to spend their money. These companies want to capture your customers’ paychecks. They want to create closed-loop ecosystems that keep as much of your customers’ money trapped as possible. They even want, in some cases, to compete directly with you to offer financial products and services (banking, payments, lending) to your customers.
This isn’t me speculating on what might happen in the future. It is happening right now.
Robinhood offers a debit card that supports direct deposit, two-day early paycheck access, and automated investing when customers get paid. It offers 4% APY on uninvested cash in customers’ brokerage accounts. It offers a premium credit card and has announced plans to introduce checking and savings accounts as well.
Coinbase similarly offers direct deposit (including converting some or all of your paycheck into crypto), a debit card, a premium credit card, and the ability to earn up to 4.5% yield on USDC balances (Editor’s Note — Coinbase refers to this as “rewards” rather than “yield” because it’s good manners not to thumb your nose at regulators when you are flagrantly sidestepping their new rules.)
Kalshi pays 4% APY on all money kept in the platform (both in users’ accounts and in open positions). Polymarket conducts all of its transactions in USDC and allows customers to easily fund their crypto wallets with USDC from bank accounts and debit and credit cards via MoonPay.
Robinhood and Coinbase both lend against the on-platform assets that their customers own (stocks and crypto, respectively). This margin lending is even starting to appear in the prediction market space (for example, Gondor will allow Polymarket customers to borrow against their open positions).
FanDuel and DraftKings both support Play+, which is a stored-value account (with FDIC pass-through insurance) that links customers’ sportsbook wallets to Discover-branded prepaid cards that they can use anywhere Discover is accepted (as well as at ATMs).
These companies all understand that in a digital economy, attention and money are inextricably linked. They have built incredibly fun and addictive games designed to capture and hold consumers’ attention. And the money is beginning to follow that attention.
Banks need to wake up before that trickle becomes a flood.
MORE QUESTIONS TO PONDER TOGETHER
Big news for the endlessly curious (yes, you): I’m collecting your fintech questions on a rolling basis.
What’s keeping you up at night? What great mysteries in financial services beg to be unraveled? Think of it this way, if a stranger is a friend you just haven't met yet, your question is a Fintech Takes conversation waiting to happen.
One that could headline a Friday newsletter or be answered in an upcoming Fintech Office Hours event.
Drop your question here, whenever inspiration strikes!
🏀 FINTECH TAKES THE COURT 🏀
Yep, it’s happening again!
I am DELIGHTED to officially announce the third annual “Fintech Takes The Court” 3x3 basketball tournament, which will take place in the morning on Sunday, October 26th, in Las Vegas.
This year’s tournament is being sponsored by SOLO, and it’s going to be the best one yet. If you’ll be attending Money 20/20 (or just in Las Vegas that week) and are interested in getting off the strip for a few hours and getting some exercise (or just coming to cheer the teams on!), fill out this form. Space is limited, so don’t wait :)
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Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
