Anatomy of a credit card rewards program
There are only a few opportunities to make a living by getting good at creating tables to facilitate high-frequency math that end-users will find entertaining but will have predictable statistical properties at scale.
One of them is designing roleplaying games. Seems like an interesting topic but someone else will have to write about it. In this column, the dragon sleeps on a hoard of interchange revenue, you slay him to get credit cards rewards points, and the card issuer running the game merrily chuckles at players’ misperception that they are dragons. No, silly, they’re much realer and much richer.
A disclaimer off the top: I used to work at, and am still an advisor of, Stripe. A major portion of the Stripe economic model is charging businesses money to take payments on credit cards. Stripe’s two largest costs are paying smart people and paying interchange, and of the two, one would feel a lot better to cut.
Another disclaimer: Due to long-standing practice, I am (homeopathically) exposed to the common equity of financial services companies that my family uses, so that I can call up Investor Relations if I ever need to escalate a routine banking issue. My family’s main U.S. bank happens to be Chase, which is mentioned below.
