# Bits About Money by Patrick McKenzie — complete archive in chronological order

Source: https://www.bitsaboutmoney.com/
Essays: 40 · Span: 2021-10-22 to 2023-09-29 · Total reading time: ~10 hours

Track your progress through this archive with a free account: https://www.evergreenessays.com/start/bits-about-money

## Essays

1. [Community Banking and Fintech](https://www.bitsaboutmoney.com/archive/community-banking-and-fintech/) (2021-10-22) — 11 min
  In this article, Patrick McKenzie explores why community banks, often overlooked and dismissed as small-town relics, are actually financial dark matter with significant market influence. He offers insights into the functions and risks faced by community banks, and how they differ from larger, algorithm-driven institutions.
2. [Financial innovation is actually happening](https://www.bitsaboutmoney.com/archive/financial-innovation-is-happening/) (2021-10-29) — 10 min
  Discover the surprising progress of financial innovation in this thought-provoking essay. Contrary to popular belief, the world is actually improving within our own lifetimes, and much of the progress has been in under-the-hood infrastructure that goes unnoticed by the general public. Find out about the emergence of free-as-in-beer banking, the transformation of the checking account landscape, and the role of competition in driving change. Don't miss this fascinating exploration of how financial innovation is shaping our lives and what we can expect in the future.
3. [How Credit Cards Make Money](https://www.bitsaboutmoney.com/archive/how-credit-cards-make-money/) (2021-11-05) — 10 min
  Patrick Mckenzie explores the complex world of credit cards and how they make money. From the intricacies of bundling and unbundling to the various revenue levers, the author breaks down the financial dynamics behind credit cards. Get ready for a deep dive into the world of payments and discover the hidden complexities that shape our everyday transactions. Whether you're a casual credit card user or a finance enthusiast, this essay will challenge your understanding of the financial services industry and leave you with a newfound appreciation for the humble plastic in your wallet.
4. [Debit cards are hidden financial infrastructure](https://www.bitsaboutmoney.com/archive/debit-cards-are-hidden-financial-infrastructure/) (2021-11-12) — 12 min
  Patrick McKenzie delves into the hidden financial infrastructure of debit cards. While credit cards often steal the spotlight, McKenzie argues that debit cards are a critical piece of the financial puzzle and have unintentionally transformed retail banking. By examining the economics of retail banking and the impact of debit card usage, he reveals how these seemingly simple cards have driven fintech innovation and changed the way we manage our money.
5. [Payments in Japan](https://www.bitsaboutmoney.com/archive/payments-in-japan/) (2021-11-19) — 21 min
  Patrick McKenzie takes us on a journey through the changing landscape of payments in Japan. Exploring the differences in credit card usage, McKenzie highlights the unique culture surrounding money and the obstacles faced by Japanese consumers when it comes to accessing credit. With his personal and professional insights, he gives us a glimpse into the future of payments in the country and hints at the potential impact these changes may have globally. Whether you're a payment geek or simply curious about the evolving world of finance, this article offers a fascinating perspective on the Japanese payments space.
6. [Bank transfers as a payment method](https://www.bitsaboutmoney.com/archive/bank-transfers-as-a-payment-method/) (2021-11-26) — 18 min
  Patrick McKenzie delves into the world of bank transfers as a payment method, shedding light on why they haven't become the norm for most transactions. He examines the core features of payment methods, including total cost, customer user experience, certainty, settlement time, and reversibility. McKenzie explores the substantial innovation happening in bank transfers, particularly outside the U.S., that will likely lead to them becoming a larger portion of the payment mix in the coming years. This thought-provoking article uncovers the intricacies behind payment systems and offers insight into the future of banking and transactions.
7. [The fraud supply chain](https://www.bitsaboutmoney.com/archive/the-fraud-supply-chain/) (2021-12-03) — 13 min
  In a fascinating exploration, Patrick McKenzie unveils the complex and surprisingly organized world of credit card fraud. Drawing on his professional experience in the field, McKenzie sheds light on the diverse ecosystem created by fraudsters, complete with HR departments, certifications, and even headhunters. Delving into the realm of payments fraud, he uncovers the various methods employed by professionals to misappropriate money from the legitimate economy. This eye-opening article provides a unique perspective on an industry that operates with the precision and sophistication often associated with legitimate businesses. Prepare to have your conception of crime and fraud turned on its head.
8. [More than you want to know about gift cards](https://www.bitsaboutmoney.com/archive/more-than-you-want-to-know-about-gift-cards/) (2021-12-13) — 11 min
  Patrick McKenzie dives into the intriguing world of gift cards, analyzing their role in the payments industry, the different types available, and the often misunderstood psychology behind their use. Discover how gift cards go beyond just a simple substitute for cash, offering personalization and storytelling that enhance the gift-giving experience. Uncover the complexities of these seemingly straightforward financial instruments and explore their potential in facilitating transfers and functioning as a valuable form of currency. Prepare to have your perceptions challenged and your understanding of gift cards expanded in this captivating essay.
9. [The secondary market in gift cards
](https://www.bitsaboutmoney.com/archive/gift-card-marketplaces/) (2021-12-17) — 14 min
  Patrick McKenzie delves into the fascinating world of secondary markets for gift cards. He explores the nature of gift cards as privately issued money and the similarities to the free banking era. McKenzie uncovers the inner workings of gift card marketplaces, where you can buy or sell gift cards at a discount, and explains the unique features of closed loop gift cards that enable this business model. Discover the intricacies of this largely unknown economy and how it professionalizes the demand and supply of gift cards.
10. [BNPLs: Businesses Needing Provided Legibility](https://www.bitsaboutmoney.com/archive/buy-now-pay-later/) (2022-01-07) — 14 min
  Patrick McKenzie delves into the world of Buy Now Pay Later (BNPL) services and sheds light on their fascinating but often misunderstood nature. He explores how BNPLs work, their core customer base, and their crucial role in consumer transactions. McKenzie examines the mechanics of BNPLs, payment timing, and the credit offering they provide. He also discusses the implications of late fees and the underwriting process. Whether you're a curious consumer or interested in the business perspective, this article offers valuable insights into the evolving landscape of payment innovation.
11. [Mortgages are a manufactured product](https://www.bitsaboutmoney.com//archive/mortgages-are-a-manufactured-product/) (2022-01-14) — 13 min
  In this fascinating essay, Patrick McKenzie delves into the intricate world of mortgages, revealing how they are not just loans between banks and customers, but rather manufactured products with their own supply chain. He challenges the common misconceptions surrounding mortgages and sheds light on the specialized workers and capital involved in the process. Whether you're a homeowner or an entrepreneur, this article will give you a new perspective on the complexities of the mortgage industry. Get ready to dive into the wild and wooly world of mortgages and uncover the truth behind this essential financial instrument.
12. [Finality does not exist in payments](https://www.bitsaboutmoney.com//archive/no-payments-are-final/) (2022-02-15) — 8 min
  Patrick McKenzie delves into the concept of finality in payments, challenging the belief that transactions are absolute and irreversible. He explains how finality is a complex technosociolegal construct, influenced by various factors like infrastructure, regulations, and the relationships between parties involved. Using examples from the cryptocurrency community and other payment methods, McKenzie illustrates the nuanced nature of transaction finality. He also highlights the role of payment rails in providing predictability and facilitating efficient dispute resolution processes. Gain a fresh perspective on the intricacies of payments and the boundaries of finality in this thought-provoking essay.
13. [Changing how Main Street businesses bank](https://www.bitsaboutmoney.com//archive/changing-the-way-main-street-businesses-bank/) (2022-02-18) — 13 min
  Patrick McKenzie dives into the underwhelming state of banking services for small and medium businesses (SMBs) and proposes a solution: embedded finance. In this thought-provoking essay, McKenzie explores how SaaS platforms can revolutionize SMB banking by providing better services, improved customer support, and a seamless onboarding experience. As an employee of Stripe, a company offering financial services to platforms, McKenzie brings a unique perspective to the table. If you're interested in the future of banking and how it can better serve Main Street businesses, this article is a must-read.
14. [Moving money internationally](https://www.bitsaboutmoney.com//archive/moving-money-internationally/) (2022-03-02) — 11 min
  Patrick McKenzie delves into the complex world of moving money internationally, specifically focusing on wire transfers and how they work. With the recent geopolitical events involving Russia and sanctions, understanding the mechanics of international money transfers becomes even more crucial. McKenzie sheds light on the role of SWIFT, correspondent banking relationships, and the intricate web of offsetting agreements that facilitate the movement of funds. Whether you're curious about the intricacies of global finance or looking to gain a practical understanding of wire transfers, this essay provides valuable insights in a rapidly evolving landscape.
15. [Hybrid offline/online transactions](https://www.bitsaboutmoney.com//archive/hybrid-offline-online-transactions/) (2022-03-04) — 17 min
  Patrick McKenzie explores the concept of hybrid offline/online transactions and how they bridge the gap between physical cash and digital payments. He focuses on the example of voucher payment systems, commonly used in Japan and other countries, which allow customers to make online payments using physical cash at convenience stores. McKenzie discusses the unique user experience and accessibility of voucher payments, particularly in emerging markets where networked payment methods may not be readily available. This thought-provoking article sheds light on the evolving relationship between atoms and bits in the world of payments.
16. [Accounting for SaaS and swords](https://www.bitsaboutmoney.com//archive/accounting-for-saas-and-swords/) (2022-03-18) — 13 min
  Patrick McKenzie delves into the complexities of accounting for SaaS (Software-as-a-Service) businesses and the nuances of revenue recognition. He highlights how engineers often overlook the human element involved in evaluating data and money, as both have history, context, and moral implications. McKenzie discusses the importance of discerning the "colour" of bits and money, and how this impacts businesses, tax agencies, and accounting practices. Drawing on his own experience as a SaaS founder, he explores the challenges faced by these companies in measuring metrics such as monthly recurring revenue (MRR) and aligning accounting standards with real-world economic impact.
17. [Charitable donations and the infrastructure supporting them](https://www.bitsaboutmoney.com//archive/charitable-donations-infrastructure/) (2022-04-01) — 16 min
  In this intriguing essay, Patrick McKenzie delves into the world of charitable donations and the intricate infrastructure that supports them. As the CEO of a charity himself, McKenzie provides an insider's perspective on how money flows in and out of charitable organizations. He explains the fascinating similarities and differences between charities and regular companies, highlighting the peculiarities brought about by tax laws and the treatment of charitable giving. Whether you're interested in the societal impact of donations or the legal aspects of running a charity, McKenzie's insightful exploration will leave you with a deeper understanding of this complex landscape.
18. [Plastic (and payments) in the fantasy supply chain](https://www.bitsaboutmoney.com//archive/payments-and-plastic-in-the-fantasy-supply-chain/) (2022-04-08) — 18 min
  In this engaging essay, Patrick McKenzie delves into the world of fantasy miniature painting and explores how disruptive innovation has transformed the industry. He traces the supply chain backward, uncovering how advancements in plastic manufacturing and the power of the internet have enabled a global network of small firms to produce highly customizable miniatures. McKenzie discusses the challenges faced by traditional manufacturing industries and highlights the abundance of options available to hobbyists today. Whether you're a geek or simply curious about the intersection of hobbies and professional interests, this article is a fascinating read.
19. [Reconciliation: A game designed to frustrate the player](https://www.bitsaboutmoney.com//archive/a-game-that-intentionally-frustrates-the-player/) (2022-04-18) — 12 min
  Patrick McKenzie takes a unique approach to explaining the intricacies of bank transfers in his latest article. He not only dives into the concept of reconciliation, a process that often plagues businesses, but also introduces a game he designed to simulate the frustration that comes with it. By blending his professional insights with a touch of humor and interactivity, McKenzie creates a thought-provoking piece that offers an engaging way to understand the complexities of money movements. Prepare to be challenged and entertained as you explore the world of reconciliation through this captivating read.
20. [Stablecoin mechanisms and use cases](https://www.bitsaboutmoney.com//archive/stablecoin-mechanisms-and-use-cases/) (2022-05-20) — 14 min
  Patrick McKenzie delves into the world of stablecoins, exploring their mechanisms and various use cases. Contrary to popular belief, stablecoins are not primarily used for arbitrage in the cryptocurrency market. Instead, they serve as collateral for investments in products with embedded leverage and are programmable assets that can be operated on by smart contracts in decentralized finance (DeFi). McKenzie uncovers the potential of stablecoins as a means to settle transactions, envisioning a future where users can seamlessly transfer funds without intermediaries. Discover the fascinating world of stablecoins and their impact on the financial landscape in McKenzie's thought-provoking essay.
21. [The alchemy of deposits](https://www.bitsaboutmoney.com//archive/the-alchemy-of-deposits/) (2022-07-07) — 9 min
  In this engaging essay by Patrick McKenzie, he delves into the often misunderstood world of bank deposits. McKenzie explores the true nature of deposits, dissecting the transaction process and shedding light on their significance in the economy. He highlights the crucial role deposits play in facilitating payments and discusses how they are treated as money. With a blend of financial insights and social engineering, McKenzie uncovers the complexities and hidden dynamics behind what appears to be a simple concept. Dive into this thought-provoking exploration of the alchemy of deposits.
22. [Deposit insurance under the coverage](https://www.bitsaboutmoney.com//archive/deposit-insurance/) (2022-07-15) — 16 min
  Patrick McKenzie delves into the complex world of deposit insurance schemes and their importance in ensuring the stability of the banking system. He explains what is covered by deposit insurance (and what is not), shedding light on the limitations that fintech firms face when trying to offer secure deposit-like products. This thought-provoking article uncovers the mechanics of deposit insurance and highlights the critical role it plays in mitigating the risks associated with bank failures. Whether you're interested in finance or fintech, this piece offers valuable insights into the workings of the banking system.
23. [The branch banking model](https://www.bitsaboutmoney.com//archive/branch-banking/) (2022-09-01) — 12 min
  In his latest article, Patrick McKenzie delves into the fascinating world of bank branches and their true purpose: selling new accounts. Gain insight into the strategies employed by banks to maximize new accounts and the value they bring. Discover the surprising statistics behind the number of accounts generated and the long-term commitment banks expect from their customers. McKenzie also explores the profitability factors of deposit accounts, from fees to net interest margin. Uncover the intricate workings of the branch banking model and its impact on the banking industry. Don't miss out on this eye-opening exploration of a familiar institution.
24. [The optimal amount of fraud is non-zero](https://www.bitsaboutmoney.com//archive/optimal-amount-of-fraud/) (2022-09-02) — 11 min
  Patrick McKenzie delves into the surprising concept that the optimal amount of fraud is actually non-zero. He challenges our preconceived notions about crime rates and argues that they are a policy choice. Digging specifically into payments fraud, McKenzie examines the dynamics between private and public sectors, as well as the complexities of liability and financial responsibility. This thought-provoking essay will make you question the traditional assumptions surrounding fraud and its societal impact.
25. [Siting bank branches](https://www.bitsaboutmoney.com//archive/why-is-that-bank-branch-there/) (2022-09-16) — 15 min
  Patrick McKenzie dives into the world of bank branches, exploring their significance as privately funded public financial infrastructure. Through his own insights and experiences, McKenzie sheds light on the complexities of siting bank branches and the strategic thinking behind it. From understanding the concept of footprint in real estate to the ideal location for a branch, this thought-provoking essay offers a unique perspective on a seemingly mundane aspect of our daily lives.
26. [Markets in power](https://www.bitsaboutmoney.com//archive/markets-in-power/) (2022-09-30) — 12 min
  Patrick McKenzie dives into the complexities of energy markets in his thought-provoking essay. With a mix of physics, market structures, and regulatory regimes, McKenzie explains why understanding electricity markets goes beyond simple models. He challenges common perceptions by exploring the multiple grids, transmission methods, and the interplay between supply and demand. As he uncovers the intricacies, McKenzie sheds light on the potential impact of global events on local energy markets and highlights the significance of power planning. This essay is a must-read for anyone interested in the hidden dynamics of electricity markets.
27. [Demystifying financial leverage](https://www.bitsaboutmoney.com//archive/demystifying-financial-leverage/) (2022-11-11) — 14 min
  Patrick McKenzie demystifies the concept of financial leverage in this illuminating essay. He breaks down the complex topic into accessible terms, making it easier to understand for non-specialists. By using basic balance sheet math, McKenzie illustrates how leverage is the ratio of liabilities to equity. He also explores the usefulness of leverage in quantifying the risks financial businesses undertake. Whether you're a finance enthusiast or simply curious about the world of leverage, this article will provide you with valuable insights and knowledge.
28. [Credit cards as a legacy system](https://www.bitsaboutmoney.com//archive/credit-cards-as-a-legacy-system/) (2022-12-02) — 18 min
  In this eye-opening essay, Patrick McKenzie delves into the world of credit cards as a legacy system. He highlights how the industry's reluctance to adapt to the changing times has created vulnerabilities, particularly in the face of modern challenges such as online transactions and card fraud. McKenzie's analysis sheds light on the complexities of the credit card system and raises questions about its long-term viability in the ever-evolving digital landscape. Prepare to challenge your assumptions and gain a deeper understanding of the infrastructure behind this ubiquitous financial tool.
29. [The infrastructure behind ATMs](https://www.bitsaboutmoney.com//archive/the-infrastructure-behind-atms/) (2023-01-02) — 12 min
  Don't miss Patrick McKenzie's fascinating exploration of the hidden world behind ATM infrastructure. Learn why ATMs were originally created, how they have evolved over time, and the surprising truths about cash and bank deposits. Discover the complex series of transactions that occur every time you make an ATM withdrawal, and the vulnerabilities and fraud risks involved. Whether you're a finance professional or simply curious about the workings of everyday technology, this insightful article will leave you with a whole new appreciation for the humble ATM.
30. [BAM is now reader-supported](https://www.bitsaboutmoney.com//archive/bam-is-now-reader-supported/) (2023-01-06) — 15 min
  Patrick McKenzie, author of BAM, announces an exciting new development - BAM is now reader-supported! McKenzie reflects on his transition from a full-time employee to an advisor and the importance of taking time off. However, he expresses his love for writing and commits to producing more issues of BAM this year. What's even better? You can now pay for a membership and make BAM even more useful to you professionally. McKenzie shares his thoughts on paywalls and dives into the historical context of paid newsletters, highlighting the rise of online publications like Motley Fool. Get ready for a fascinating exploration of the financial infrastructure behind email newsletters!
31. [KYC and AML: beyond the acronyms](https://www.bitsaboutmoney.com//archive/kyc-and-aml-beyond-the-acronyms/) (2023-01-23) — 19 min
  Patrick McKenzie delves into the complex world of Know Your Customer (KYC) and anti-money laundering (AML) programs in the financial industry. While these acronyms may sound familiar, McKenzie goes beyond surface-level understanding to reveal the nuanced and often misunderstood nature of these regulatory practices. In this thought-provoking essay, he explores how these programs aim to stochastically manage crime and terrorism by requiring financial institutions to implement their own risk management strategies. McKenzie challenges preconceived notions about the effectiveness of KYC and AML, providing a fresh perspective on their role in mitigating risks in the industry.
32. [BAM's Early Adopter discount ends soon](https://www.bitsaboutmoney.com//archive/early-adopter-discount-reminder-0125/) (2023-01-25) — 3 min
  In his latest article, Patrick McKenzie discusses the Early Adopter discount for BAM's supporting memberships, which is ending soon. As a professional publication focused on financial infrastructure and technology, BAM provides valuable insights into this intersection. McKenzie, known as patio11 on the Internet, shares his plans for publishing between 20 and 26 issues this year, with the support of readers. Don't miss out on this opportunity to join as a supporting member and gain access to McKenzie's thought-provoking essays on the fascinating world of tech and finance.
33. [Money laundering and AML compliance](https://www.bitsaboutmoney.com//archive/money-laundering-and-aml-compliance/) (2023-02-10) — 16 min
  In this captivating essay, Patrick McKenzie delves into the complex world of money laundering and AML compliance. He explores the nuances and challenges faced by financial institutions in preventing money laundering, highlighting the delicate balance between detecting illicit activities and accommodating legitimate financial needs. Gain a deeper understanding of the stages of money laundering and the role of compliance departments in mitigating these risks. If you've ever been curious about how money laundering works and the measures put in place to combat it, this thought-provoking piece by McKenzie is a must-read.
34. [Improving how credit cards work under the covers](https://www.bitsaboutmoney.com//archive/improving-cards-under-the-hood/) (2023-02-24) — 23 min
  Discover how credit cards are undergoing a transformation as Patrick McKenzie delves into the flaws of the current system and the solutions being developed. In this enlightening article, McKenzie shares insights from his experience at Stripe, explaining how the industry is addressing issues like transaction failures and the security risks associated with card numbers. Gain a deeper understanding of the challenges faced by the credit card ecosystem and the engineering work being done to improve efficiency and security, ultimately leading to a better user experience. Buckle up and prepare to have your perspective on credit cards changed.
35. [Banking in very uncertain times](https://www.bitsaboutmoney.com//archive/banking-in-very-uncertain-times/) (2023-03-14) — 33 min
  Patrick McKenzie delves into the current state of banking in uncertain times, examining the recent failures of multiple U.S. banks and the potential for a widespread crisis. McKenzie explains the underlying factors contributing to these failures, including the impact of rising interest rates on asset prices and the consequences for financial institutions and individuals alike. With a straightforward and sober-minded approach, this thought-provoking essay provides valuable insights for anyone seeking to understand the fragility of the banking system and its implications for the broader economy.
36. [Deposit insurance maximization as a service](https://www.bitsaboutmoney.com//archive/deposit-insurance-maximization-as-a-service/) (2023-04-05) — 22 min
  Patrick McKenzie delves into the complex world of deposit insurance maximization as a service and the challenges it poses in analyzing systemic risks in the banking system. In this article, McKenzie explores how financial service providers navigate the limits of deposit insurance to offer treasury management solutions to companies. Gain insights into the intricacies of deposit accounts and the pricing of banking services, shedding light on a lesser-known aspect of the financial industry. Discover the complexities behind why startups and businesses choose to keep large sums of money in bank accounts and uncover the underlying dynamics of this practice.
37. [Deposit franchises as natural hedges](https://www.bitsaboutmoney.com//archive/deposit-franchises-as-natural-hedges/) (2023-05-05) — 27 min
  In this thought-provoking essay, Patrick McKenzie dives into the world of banking and explores the concept of deposit franchises as natural hedges. As the banking crisis continues to unfold, McKenzie examines the structural issue of rising interest rates and its impact on asset prices and bank solvency. With a sharp wit and financial expertise, McKenzie challenges conventional wisdom and provides a unique perspective on the risks taken by banks and the perplexity surrounding interest rate risk. Don't miss this illuminating exploration of the banking sector and the lessons to be learned from its current turmoil.
38. [Requiem for a bank loan](https://www.bitsaboutmoney.com//archive/requiem-for-a-bank-loan/) (2023-06-16) — 18 min
  Patrick McKenzie delves into the intricacies of the banking crisis and reflects on his personal experiences with a particular bank's line of credit. He explores the underappreciated benefits of this product and the peculiar interest rates offered, shedding light on the wider misunderstandings surrounding the crisis. As McKenzie discloses his relationship with the bank, he navigates the social complexities and invites readers into a thought-provoking discussion on the financial industry. Prepare for an informative and eye-opening journey through the intricacies of banking in this captivating article.
39. [Credit card debt collection](https://www.bitsaboutmoney.com//archive/the-waste-stream-of-consumer-finance/) (2023-08-11) — 25 min
  In this eye-opening essay, Patrick McKenzie delves into the world of credit card debt collection, shedding light on an often overlooked aspect of the finance industry. He explores the lifecycle of defaulted debt and provides insights into the different archetypes of credit card users. With personal experiences in dealing with debt collectors, McKenzie offers a unique perspective on the brokenness of the system. If you've ever been curious about the inner workings of debt collection and its impact on individuals, this thought-provoking piece is a must-read.
40. [A review of Number Go Up, on crypto shenanigans](https://www.bitsaboutmoney.com//archive/a-review-of-number-go-up-on-crypto-shenanigans/) (2023-09-29) — 19 min
  In his candid review, Patrick McKenzie dives into the captivating world of cryptocurrencies, dissecting the book "Number Go Up" by Zeke Faux. McKenzie, a long-time skeptic of cryptocurrencies, commends Faux's unbridled contempt for the industry's scam promoters. He also explores the book's exploration of investigative journalism, the allure of numbers in finance, and Faux's engaging writing style. If you've ever been curious about the ins and outs of the crypto world or enjoy a thought-provoking discussion on the intersection of finance and journalism, this review is a must-read.