Most retail customers don’t think much about gift cards or store credit balances, but that money can add up to big bucks, and essentially are cost-free loans to the company.
Starbucks owes $1.6 billion to clients that have purchased gift cards or otherwise hold balances with the store. These are funds that the coffee giant gets to use for whatever purpose it wants, and never has to pay interest or otherwise compensate the “lender.” Yes, Starbucks must make good when a customer wants to use his credit balance to buy stuff, but it takes a while for people to run down these balances, and new people are continually adding to the pot.
It’s all about gift cards in the retail world.
There was a time when you’d get $20 from Grandma and she’d say, “Don’t spend it all in one place.” Now we give each other gift cards tied to specific retailers, which requires the recipient to spend it all in one place.
And then there’s PayPal and other fund transfer companies. Any balance held is a loan to the company.
This is where things get interesting for Facebook’s new currency, libra. If it goes live, then those who buy units of libra will essentially be giving Facebook and the other partners billions of dollars that they will put on deposit somewhere. This group of investors, not the individual customers, will then earn interest on the pot of cash. What do customers get? The privilege of using libra instead of money. For some, like those in countries with questionable currency and shaky monetary systems, that might be a good thing. For most of us, it’s just one more way for big companies to get more value out of our cash than we do, while telling us everything is great.