There is such a thing as an interest-free loan, but this kind of loan isn’t given to just anyone. In fact, it is exceedingly difficult to get one from a bank, even for those with excellent credit. However, there have never been more interest free loans now than at any point in history. 

Starbucks has been the recipient of over $1.6 billion that its customers have entrusted it with via their coffee cards. In return, Starbucks doesn't give any money back to its customers, so this is an interest-free loan.

These deposits amount to 9 percent of the total loans that Starbucks has borrowed from financial institutions. Starbucks has paid interest at rates from 0.46 percent to 4.5 percent at most to the banks, but Starbucks borrowed this deposit from their customers for free.

What's more stunning is that up to 10 percent of these coffee card deposits are left unused by their customers resulting in pure profit for Starbucks. In fact, it is estimated that the financial gain to Starbucks from customers losing or forgetting to use their coffee cards is estimated to be more than 100 million dollars.

This prompted Hana Financial Group Chairman Kim Jung-tae to state at the beginning of 2020 that banks should also compete with coffee companies like Starbucks.

According to Federal Deposit Insurance Corporation(FDIC) data, 85.1 percent of U.S. banks have assets of less than $1 billion. Starbucks could transform itself into a competitive bank at any time if it decided to. Chairman Kim Jung-tae called Starbucks an "unregulated bank."

PayPal's customer deposits are even larger than Starbucks, reaching $20 billion. However, the FDIC said PayPal is not considered a bank, but it could be viewed as an unauthorized bank.

PayPal retains the deposits separately to avoid regulations and puts them a fixed deposit account or purchases government bonds and other instruments with them.

Whether or not to view organizations such as Starbucks and Paypal as banks are just a difference in interpretations of banks. Indeed, these small differences in interpretations have changed history and influenced the rise and fall of nations.

Several religions have come up with their own interpretations of the same Old Testament principle regarding interest. Catholicism prohibited receiving interest. The key logic was that one should not receive more than the amount that was lent.

Judaism did not forbid receiving interest, so long as it was only collected from the non-Jewish. This led to the Jewish ability to control global finance which all began with this one difference in their interpretation.

Islam has always forbidden interest. Lending money itself is not forbidden, and their interpretation allows them to share profits instead of interest.

The Catholics eventually changed their position on the charging of interest thanks to Jacob Fugger, the richest man in European history. In 1514, Pope Leo X had squandered the papal riches and turned to Fugger for assistance. A plan was devised to sell documents called indulgences that pardoned people for the sins they had committed. Furthermore, in 1515, Fugger moved Leo X to sign an edict justifying the imposition of interest. These two actions had far-reaching consequences as they inspired Martin Luther to begin the movement that ultimately leads to the Protestant Reformation.

Traditional loans have always been made based on credit: if credit is low, then the collateral is put up to secure the loan. Also, credit ratings are carefully assessed before lending. Yet Starbucks was able to take out millions of dollars of interest-free loans from customers without even a basic credit rating. Starbucks is taking advantage of the new platform economy.

A platform economy is one in which economic and social activity is facilitated by a platform that creates value by facilitating exchanges between business and consumers. The platform snowballs based on network effects and its size is proportional to the degree of credit available. A platform economy is an indomitable economy.

This is why the U.S. reacted so strongly to the news that the world’s leading platform, Facebook, was moving forward with its Libra proposal. The US government has concerns that the Libra could seriously threaten dollar hegemony.

Even if Facebook subscribers only deposited one dollar each in Libra, 3 billion dollars would accumulate in no time. It is predicted that Libra could become so pervasive that there will soon come a time when there are people who have never touched a dollar bill.

Unlike customers who deposit dollars or euros in banks, customers of platforms like Starbucks, Paypal and Facebook do not want interest, they just want quality services provided by respective platforms.
 

Kim Hyoung-joong, Chief Editorial Writer 다른기사 보기