How Eco saves—and makes—you money (plus: crypto actually explained for the first time)

For most people, seeing is believing: once they use Eco and realize the power of compounding their earnings and rewards in one place, they become our champions and invite everyone they know to the app. But some people need to hear more first. If you’re reading this, odds are you’re one of these people.

You're probably wondering a few things about Eco. How does 5% APY work? What about the 5% cash back? What's the vision for Eco Points? How does Eco make money, and is it sustainable?

It's totally reasonable to wonder how we can offer benefits that beat basically every other product on the market. And while our mission is to make your money work for you, it's just as important that we build a sustainable business that can serve you forever.

To understand how we’re able to offer the benefits we do requires at least a high-level understanding of how today’s financial system works—and more specifically, how it doesn’t.

While the financial infrastructure that underpins today's financial system was once state of the art, the reality is that its last major update came in the 1970s. Most of modern “fintech” is just shiny interfaces attempting to hide this crumbling foundation. If you want to understand how a better product—and model—can be built, you need to get into some of the nuts and bolts. Thankfully, we're up for diving into the details as deeply as you want (as long as you remember that you're the one asking to go deeper!). 

But first, we'll give you some short answers. The common thread: Eco cuts out inefficiencies in the financial system, and then Eco passes the gains back to you.

How does the APY work?

When you deposit money at your bank, they loan it back out in the form of mortgages, small business loans, credit cards, and more. On average, banks target 3-4% margin on their lending activity.

They then turn around and pay you... almost nothing. For the past decade, savings interest rates have averaged 0.01-0.05% annually. Today, with rising interest rates, some high-yield accounts pay 3-4%, but almost always with strings attached. Yet Chase and Bank of America still only pay 0.01% for the privilege of lending out your money. It's insulting.

Eco puts your money back to work for you. The upside from your money goes straight into your pocket.

Plus, the average American household pays an additional $329 in fees to their bank each year. We don't charge any fees (ever). And those savings are effectively added to your annual earnings and cash back, too.

And on top of that, we're able to get access to more appealing interest rates by removing ourselves from the bureaucracy of a big bank and actively seeking out the best opportunities. So we get higher interest rates than the big banks can pay and share that upside with you in the form of APY rewards.

And what about the cash back?

Again: middlemen. Every time you buy something from a merchant, a half-dozen intermediaries you've never heard of take their cut. When you swipe your credit card in a store, your money doesn’t go straight to them (like it does when you hand them cash). 

In such a transaction, your money passes through the bank that issued you the card (aka “the issuer”), the bank that represents the merchant (“the acquirer”), and often another "payments facilitator" in-between. On top of this, VISA or Mastercard, the networks that connect this web of parties, charge a fee as well (“interchange”). All together, for most merchants, this adds up to somewhere over 3% on every transaction.

When you buy something online, tack on another 1% to that list for their ecommerce software. Finally, if you’ve bought something you found online via Google or Instagram or Facebook, the merchant pays them what is often an extra 25-50% of the purchase price in marketing expense.

You know what a better solution would be? For you and the merchant to connect directly, and for you to get the savings from cutting out those parties.

That's what we enable — direct payments to merchants. Money in your Eco account can go straight to them. Because cutting out the card networks saves the merchants money, they’re willing to support it. And in many cases, they’re even willing to incentivize it (remember how much merchants are willing to pay Google for sending them a customer). This is where the cash back comes from.‍

How does Eco make money?

This alone sounds too good to be true — but it's, well, the truth.

We're aligned with you.

Every time you do anything in Eco — save, spend, refer friends — you earn Eco Points. Today you can redeem them for more cash back or for limited "drops" from the places you spend most; and many other new benefits are in store. They don’t do much today, but one day they will. Our business model is to try to make these Points as useful as possible over time. In fact: our whole team has a chunk of our personal compensation tied to the success of Eco Points.

Imagine a world where Amex executives got paid in Amex points, or Chase employees in Chase points. What do you think they’d do?

We think they’d probably try to do the best possible thing for their customers — they’d try to make those points as useful as possible, giving their customers a real stake in the system rather than diluting it over time.

There's much more to get into on this (remember: these are the short answers). But the reality is: unlike every other financial product out there, we don't need to take money out of your pocket. We only win when you do.

Plus, there's another level: we're trying to make Eco your primary wallet for saving, spending, and more. If we do our jobs well, you should send your whole paycheck into Eco.

Want to go deeper?

The rest of this post will give you a peek behind the curtains. You’ll understand why the banks aren’t entirely the greedy rent-seekers you’ve been made to believe, and how the only way they can survive is to take a piece of the action every time your money moves (and when it sits, too).

Eco is building a better model — and doing that means not being trapped within the existing banking system, but being able to put your money to work wherever the benefits are best (and safe). It means leaving the existing system and departing from today’s business models.

So, if you’re one of the many people who still think this is too good to be true — but are willing to read about why it might not be — buckle up.

We’ll cover:

• how banks make money (hint: pushing you into bad personal decisions)
• how money moves (spoiler: even electronic transfers aren’t always so electronic)
• what the hot new fintech companies are doing (putting lipstick on a pig)
• how blockchain can play a part in fixing this (no, really — plus, we’ll even explain it to you simply for the first time)
• and much more

Click here to read the next post in this series.