“There's about $15 trillion of retail deposits in the US banking system, but banks pay on average about 40 basis points on yield a year. … That's more or less $600 billion that are going to banks to pay for banking branches that in a digital banking environment would actually stay in consumers' pockets. So this is a massive wealth tax, the fact that banks don't pay any yield.”
Invest Like the Best (Patrick O'Shaughnessy) · Money & Markets · October 2026
The Nubank founder sorts what's wrong with consumer banking into access, cost and intelligence. This is his US example of hidden cost. He adds that higher-income customers do get paid yield, so the lower your income, the more of this "tax" you pay.
Transcript
…to increase your level of ambition. And for somebody like us, especially when we look at how early it is in the transformation, for us is why don't we go to 100 countries and try to accelerate this transformation by New Bank being one of the leading digital financial services firms in the world.
…like yours doing for the customer in three or five years because technology has made things possible that weren't before? Just like mobile made a lot of new things possible. We've got a much bigger wave now. Like, have you really dreamed about what could be possible? What are some of those ideas?
…a high-income consumer. But when you look at the cost of that banking system, it's pretty significant in ways that are not readily apparent. So, for example, there's about $15 trillion of retail deposits in the US banking system, but banks pay on average about 40 basis points on yield a year. In a world where your interest rates are 4.5%, 5%, you look at the calculation of those 15 trillion, that's more or less $600 billion that are going to banks to pay for banking branches that in a digital banking environment would actually stay in consumers' pockets. So this is a massive wealth tax, the fact that banks don't pay any yield. If you're high income, you do. The lower you income, the less you get paid. That's a huge tax and that's a huge cost. And then you look at remittances, for example, in the US, $100 billion go out of the US. People pay 5% to 10% per transaction. That will go to zero. Remittances, moving money is you're moving bits. That will trend towards zero in a more competitive environment. Monthly account…
Flesh that last piece out a little bit more. Wealthfront used to have this idea of self-driving money, which comes to mind. Like, okay, I've got some money. Either I don't have it in the banking system, which is the worst. So I come into the banking system, I'm earning 40 basis points instead of…
The first obvious rearrangement is those 600 billion that banks are keeping in their balance sheet to pay for banking branches, get rearranged, get forwarded to all the banking consumers because suddenly they realize, what am I doing with my money leaving it at zero? Especially when you think about…
One of the questions that I think lots of investors and founders are wrestling with is what will be the best competitive advantages or moats in this new AI era when the cost to build new stuff digitally is much, much lower. If you had to imagine it like you're some new founder, I strip everything…
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