Fintech Concept Card Template (Payments, Lending, Stablecoins)

Fintech Concept Card: [Your name, elective or company, and date]

An elective-level concept card for fintech: how payments, lending and digital asset businesses make money, where the risk sits, and which rules govern each activity. It is for MBA students in a fintech, technology strategy or financial institutions elective and for candidates preparing for product, strategy or investment roles at payment companies, digital lenders, banks and crypto-asset firms. It teaches the unit economics of three business models (merchant acquiring, buy now pay later lending and a payment stablecoin issuer), a regulation map organised by activity rather than by company, and the questions an investor or regulator asks about each line. Worked example A solves the economics of Varnelle Pay, a fictional multi-line fintech; Worked example B is a half-solved credit stress case; Exercise C asks you to reprice the payments line for a different market, find the break-even revenue share of a stablecoin and draft a regulation map for a launch. Source basis: Rochet and Tirole (2003), Diamond and Dybvig (1983), Philippon (2016), Buchak, Matvos, Piskorski and Seru (2018), Fuster, Plosser, Schnabl and Vickery (2019), Berg, Burg, Gombovic and Puri (2020) and Gorton and Zhang (2021), written up in original words with fictional numbers. The regulation map is a dated table checked on 2026-10-30. Replace every [bracketed] value and every row marked Example. This is a learning aid, not legal, regulatory, investment or financial advice; check the current official text and a qualified professional before you rely on any rule.

Document control

Contents

• When to use it
• The idea in plain language
• Formulas and notation
• Assumptions and limits
• Regulation map by activity (dated)
• How investors, operators and regulators use the card
• Worked example A (fully solved): Varnelle Pay
• Worked example B (half solved): a credit stress case
• Exercise C (unsolved): a new market and a launch map
• Connections to other cards
• Common mistakes and misconceptions
• Self-test questions
• My notes and next steps
• Sources and further reading
• Answer key

When to use it

Use this card when:

• a case, interview or investment memo asks you to explain the revenue and cost of a payment company, a digital lender or a crypto-asset business, and to say which line of the income statement is most exposed;
• you must compare a fintech with a bank doing the same activity, and decide whether its advantage comes from technology, from a lighter regulatory burden or from cheaper funding;
• a product team plans to launch a payment, credit or digital asset feature in a new market and needs a first map of the licences and rules it will meet;
• you are valuing a fintech and need to separate revenue that scales with volume from revenue that depends on interest rates or credit conditions, because the two deserve different multiples.

Do not use the card as a compliance checklist. It teaches the economics and the shape of regulation; a launch needs the current official texts and advice from qualified lawyers in each market.

The idea in plain language

A bank bundles several activities: it holds deposits, moves money, lends, and manages risk, all inside one licensed balance sheet. Fintech firms usually unbundle these activities and do one of them with better software, a better customer experience or a different distribution channel. The useful question is never "is this a fintech?" but "which banking activity is this firm doing, and how does it earn a margin on it?"

Payments earn a small percentage of a very large flow. A merchant acquirer or payment facilitator charges the merchant a merchant service charge (MSC) on each card payment. Most of that charge is passed on: the interchange fee goes to the card issuer and scheme fees go to the card network. What is left, the net take rate, must cover processing, fraud and chargeback losses, and customer acquisition. Payment networks are two-sided markets in the sense of Rochet and Tirole (2003): the network sets a price structure across merchants and cardholders, and interchange is the tool that shifts cost from one side to the other. That is why interchange is regulated in many markets. Payments businesses scale well because cost per transaction falls with volume, but the net take rate is under constant pressure from competition and regulation.

Lending earns a spread and takes credit risk. A digital lender, including a buy now pay later (BNPL) provider, earns interest, fees or a merchant discount; it pays for funding and loses money when borrowers default. The lender's edge is usually in underwriting and distribution: Berg, Burg, Gombovic and Puri (2020) show that simple digital footprint variables (such as device type and email provider) predict default about as well as a credit bureau score in their sample, and Fuster, Plosser, Schnabl and Vickery (2019) find that technology-based mortgage lenders process applications faster without higher default rates. The risk is that a lender funded by warehouse lines or securitisation, not by deposits, faces a funding squeeze exactly when losses rise. Buchak, Matvos, Piskorski and Seru (2018) attribute much of the growth of shadow-bank and fintech mortgage lending to regulatory differences and part to technology, which is a reminder that a cost advantage can be a regulatory gap that closes.

Digital assets cover crypto-asset trading, custody and payment stablecoins. A payment stablecoin issuer takes money from holders, invests it in safe short-term assets and earns the yield on those reserves, while promising to redeem each token at par. The model is old: Gorton and Zhang (2021) compare stablecoins with the private bank notes of the US free banking era and argue that par redemption is only credible if reserves are safe and liquid. The economics are simple and highly sensitive to interest rates, because holders are not paid interest under the main regimes (see the regulation map) and the issuer keeps the yield, often sharing it with the platforms that distribute the token. A run is the main risk: if holders doubt the reserves, they all redeem at once, the same mechanism Diamond and Dybvig (1983) describe for banks.

The common thread is that each activity has a natural owner of risk and a natural regulator. Philippon (2016) notes that the unit cost of financial intermediation in the US stayed roughly flat for a century despite advances in technology, and argues that fintech entry and regulation that favours competition could lower it. Regulation follows the activity: a firm that holds client money, lends to consumers or issues a token meets the rules for that activity, whatever it calls itself.

Formulas and notation

Payments: net revenue and contribution on total payment volume (TPV):

Net take rate as a share of volume, and the break-even merchant service charge:

Lending (short-term instalment credit funded by debt): average receivables, contribution and the break-even loss rate:

Expected credit loss for a single exposure, the building block behind $\ell$:

Payment stablecoin issuer profit, with outstanding tokens equal to reserves $R$:

Excel: with named cells, payments contribution is =TPV*(MSC-IC-SF)-Cost_tx*TPV/Ticket-Fraud*TPV; BNPL contribution is =Fee*GMV-CoF*GMV*Weeks/52-Loss*GMV-Serv*GMV; break-even loss rate is =(Fee*GMV-CoF*GMV*Weeks/52-Serv*GMV)/GMV; stablecoin profit is =(1-Share)*Yield*Reserves-Fixed_cost. Use a data table (Data, What-If Analysis, Data Table) to show profit against the yield or the loss rate.

Assumptions and limits

• Contribution, not profit. Each line is shown before customer acquisition cost, technology development and head-office overheads. A fintech can have positive contribution and still lose money; link to mba/mba-customer-lifetime-value-card for acquisition economics.
• Blended rates. Real merchant pricing varies by merchant size, card type, region and channel. A blended rate is enough for a case but hides mix effects: a shift towards credit cards or cross-border cards raises interchange.
• Interchange as a pass-through. The card-acquiring model assumes "interchange plus" pricing is not used, so the acquirer bears mix risk. Under interchange-plus pricing, the merchant bears it and the acquirer's margin is the markup alone.
• Short-term credit only. The lending formula fits instalment credit repaid within weeks. Longer loans need amortisation schedules, interest income and loss curves by vintage; finance/credit-memo and finance/ecl-methodology show the fuller treatment. Accounting provisions (expected credit loss under IFRS 9 or CECL in the US) recognise losses earlier than the cash loss rate used here.
• Funding cost on all receivables. The example charges the cost of funds on the whole receivable book. In practice an equity tranche funds part of it; the return on that equity is the real test of the model.
• Stablecoin reserves at a single yield. Reserve income follows short-term rates almost one for one. The yields in Worked example A are illustrative assumptions, not forecasts; use the current short-term government rate in your own work.
• No tax and no regulatory capital. A bank or licensed lender also holds capital against its assets, which lowers the return on equity; payment and e-money institutions hold own funds and safeguard client money. Both change the comparison between a fintech and a bank.

Regulation map by activity (dated)

Regulation attaches to what a firm does. The table below lists, for each activity, the main instrument in the EU, the UK and the US as examples, with the status found on the official page on 2026-10-30. It is a learning map, not a complete list: anti-money laundering, data protection, consumer protection and conduct rules apply on top of every row, and many countries outside these three have their own regimes. This is not legal advice; check the current official text and a qualified professional.

Questions to ask for each activity in a launch map: which licence, or which licensed partner, carries the activity; who holds the client money and how it is safeguarded; who bears fraud and credit losses; which consumer disclosures apply; and which date in the table could change the economics in the next two years.

How investors, operators and regulators use the card

Fintech valuations moved a lot in the past decade because markets repriced the same revenue once its source became clear. Fee revenue from payments tends to grow with volume and to be valued like software or processing. Revenue that depends on short-term rates (float and reserve income) or on credit performance (lending spreads) is valued more like a bank, because it falls when rates fall or losses rise. A good analysis splits the income statement along these lines before choosing a multiple; see mba/mba-dcf-valuation-card and mba/mba-venture-capital-guide.

Worked example A (fully solved): Varnelle Pay

Varnelle Pay is a fictional European fintech with three business lines. All figures are Example inputs for one year, in EUR m for payments and lending and USD m for the stablecoin line, which is run by a separate fictional US issuer, Varnelle Digital.

Line 1: merchant acquiring (EUR m)

Example inputs: TPV 2,000; average ticket EUR 40, so 50 million transactions; blended merchant service charge 1.20%; consumer card mix 70% debit at the 0.2% interchange cap and 30% credit at the 0.3% cap, so blended interchange 0.23%; scheme fees 0.12%; processing cost EUR 0.03 a transaction; fraud and chargeback losses 0.05% of TPV.

The gross charge of 1.20% looks large, but only 0.725% of volume is left after pass-through costs, processing and fraud. A competitor that cuts the merchant service charge by 10 basis points takes 2.00 out of contribution (=2000*0.1%), or 14% of it.

Line 2: buy now pay later (EUR m)

Example inputs: merchant-funded pay-in-four product; gross merchandise value financed 500; merchant fee 4.0%; six weeks outstanding on average; cost of funds 6.0% a year on average receivables; net credit losses 1.0% of volume; servicing and collections 0.5% of volume; no consumer interest or late fees.

Short duration is the engine of this model: each euro of receivables turns over almost nine times a year, so a 6% funding rate costs only 0.69% of volume (=3.46/500). Credit losses are the largest cost, and the loss rate can rise to 2.81% before contribution reaches zero. That buffer is the number a warehouse lender asks for first.

Line 3: payment stablecoin issuer (USD m)

Example inputs for Varnelle Digital: tokens outstanding and reserves 1,000; reserves held in short-term government assets yielding 4.0% a year (an illustrative assumption, not a forecast); 50% of reserve income paid to distribution partners; fixed operating, attestation and compliance cost 8; no interest paid to holders, as required under REG-07 and REG-08.

Break-even yield: =8/((1-50%)*1000) = 1.60%. Every percentage point of short-term rates is worth 5.00 of profit to this issuer, so a fall in rates from 4% to 2% cuts profit by 83% with no change in the business.

Comparing the three lines

The judgement to state: the payments line is the one an investor would pay the highest multiple for, because it is least exposed to rates and credit; the stablecoin line looks the most profitable per unit of fixed cost today, but it is a bet on short-term rates and on trust in the reserves.

Worked example B (half solved): a credit stress case

Same BNPL line as Worked example A. A downturn doubles net credit losses to 2.0% of volume and raises the cost of funds to 8.0% a year, because the warehouse lender reprices the facility. Volume, merchant fee, duration and servicing cost are unchanged.

Questions to answer: by how much does contribution fall, and which of the two shocks causes most of the fall? Why is the break-even loss rate almost unchanged even though funding is a third more expensive? What would you ask the merchant partners to change first? [ ]

Exercise C (unsolved): a new market and a launch map

C1. Varnelle Pay considers a market without interchange caps. Keep TPV, ticket size, processing cost and fraud rate from Worked example A. The merchant service charge is 2.50%, blended interchange 1.75% and scheme fees 0.14%. Find net revenue, contribution and the net take rate. Explain why the gross charge more than doubles while contribution falls.

C2. Short-term rates fall to 1.5%. Keeping the fixed cost of 8 and reserves of 1,000, what is the highest share of reserve income Varnelle Digital can pay its distribution partners and still break even? What does that tell you about the bargaining position of large distribution platforms?

C3. Varnelle Pay plans to offer its BNPL product to consumers in one EU member state and a stablecoin wallet to US users. In no more than 150 words, list the activities involved, the row of the regulation map each one touches, two questions for counsel in each market, and the dates that could change the economics in the next two years.

Connections to other cards

Common mistakes and misconceptions

1. Treating the merchant service charge as revenue. Most of it passes through to issuers and networks. Quote net revenue or the net take rate when you compare payment companies.
2. Calling float or reserve income "fee income". It is rate income and falls when central banks cut rates; value it accordingly.
3. Ignoring duration in short-term lending. The same annual funding rate costs very different amounts per unit of volume for a six-week product and a two-year loan.
4. Using the loss rate of a growing book in good times as a through-the-cycle rate. Young vintages have not yet defaulted; look at losses by vintage.
5. Assuming a fintech has no balance-sheet risk because it has no banking licence. Lenders funded by warehouse lines can be cut off in a downturn, exactly when losses rise.
6. Assuming stablecoin holders earn interest. Under the EU and US regimes in the map, issuers may not pay interest to holders; returns offered by third parties raise separate legal questions.
7. Mapping regulation by label. Calling a product "payments", "credit" or "rewards" does not decide which rules apply; the activity does.
8. Using an undated regulation table. Several rows in the map changed within the last two years; every row needs a checked date and a link.
9. Confusing a regulatory cost advantage with a technology advantage. If the gap comes from lighter rules, it may close when rules change (Buchak et al. 2018).
10. Forgetting fraud as a cost line. Reimbursement rules such as REG-04 move fraud losses onto payment firms.

Self-test questions

1. Name the three pass-through or direct cost items between the merchant service charge and payments contribution in Worked example A.
2. What is Varnelle Pay's net take rate, and how much contribution does a 10 basis point price cut remove?
3. Why does a 6% funding rate cost the BNPL line only 0.69% of volume?
4. Write the formula for the break-even loss rate and compute it for Worked example A.
5. What is the issuer's break-even reserve yield in Worked example A, and why does it depend on the partner share?
6. Why is stablecoin reserve income closer to bank income than to software income?
7. Give one reason in Rochet and Tirole's framework why card networks charge interchange.
8. According to Berg et al. (2020), what kind of information can predict default about as well as a credit bureau score in their sample?
9. What is the main source of run risk for a payment stablecoin, and which paper describes the same mechanism for banks?
10. Which EU regulation caps consumer card interchange, and at what levels?
11. On the checked date, what was the status of the EU Payment Services Regulation and PSD3?
12. Under the GENIUS Act, when does the law take effect?

My notes and next steps

Sources and further reading

Primary works:

• Diamond, D. W. and Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity. Journal of Political Economy, 91(3), 401-419.
• Rochet, J.-C. and Tirole, J. (2003). Platform competition in two-sided markets. Journal of the European Economic Association, 1(4), 990-1029.
• Philippon, T. (2016). The FinTech opportunity. NBER Working Paper 22476, https://doi.org/10.3386/w22476.
• Buchak, G., Matvos, G., Piskorski, T. and Seru, A. (2018). Fintech, regulatory arbitrage, and the rise of shadow banks. Journal of Financial Economics, 130(3), 453-483.
• Fuster, A., Plosser, M., Schnabl, P. and Vickery, J. (2019). The role of technology in mortgage lending. The Review of Financial Studies, 32(5), 1854-1899.
• Berg, T., Burg, V., Gombovic, A. and Puri, M. (2020). On the rise of FinTechs: credit scoring using digital footprints. The Review of Financial Studies, 33(7), 2845-2897.
• Gorton, G. B. and Zhang, J. (2021). Taming wildcat stablecoins. Working paper, SSRN, https://doi.org/10.2139/ssrn.3888752.

Official pages for dated facts (checked 2026-10-30):

• European Parliament Legislative Observatory, procedure 2023/0210(COD), Payment Services Regulation, https://oeil.europarl.europa.eu/oeil/en/procedure-file?reference=2023/0210(COD).
• Regulation (EU) 2024/886 on instant credit transfers in euro, https://publications.europa.eu/resource/celex/32024R0886.
• Regulation (EU) 2015/751 on interchange fees for card-based payment transactions, Articles 3 and 4, https://publications.europa.eu/resource/celex/32015R0751.
• Payment Systems Regulator, APP fraud reimbursement protections, https://www.psr.org.uk/information-for-consumers/app-fraud-reimbursement-protections/.
• Consumer Financial Protection Bureau, Personal financial data rights, https://www.consumerfinance.gov/personal-financial-data-rights/.
• Directive (EU) 2023/2225 on credit agreements for consumers, Articles 2 and 48, https://publications.europa.eu/resource/celex/32023L2225.
• Regulation (EU) 2023/1114 on markets in crypto-assets, Articles 50, 143 and 149, https://publications.europa.eu/resource/celex/32023R1114; ESMA MiCA page, https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/markets-crypto-assets-regulation-mica.
• GENIUS Act, Public Law 119-27, sections 4 and 20, https://www.govinfo.gov/app/details/PLAW-119publ27.
• EIOPA, Digital Operational Resilience Act, https://www.eiopa.europa.eu/digital-operational-resilience-act-dora_en.

Textbooks (further reading, by name only): Mishkin and Eakins, Financial Markets and Institutions; Saunders and Cornett, Financial Institutions Management.

Open resource: OpenStax, Principles of Finance (CC BY-NC-SA 4.0), https://openstax.org.

Answer key

Worked example B: funding cost 4.62 (=8%*57.69); credit losses 10.00; contribution 2.88 (=20-4.62-10-2.5), or 0.58% of volume; new break-even loss rate 2.58% (=(20-4.62-2.5)/500). Contribution falls by 6.15, from 9.04 to 2.88: 5.00 of the fall comes from losses and 1.15 from funding. The break-even loss rate barely moves (2.81% to 2.58%) because the six-week duration keeps funding cost small relative to volume; the real damage is that actual losses of 2.0% now sit close to the 2.58% break-even, so a further small rise wipes out the line. Ask merchants for a higher fee on high-risk categories or tighten approval rates first; a warehouse lender will want to see vintage loss curves and an early amortisation trigger.

Exercise C:

• C1: net revenue =2000*(2.5%-1.75%-0.14%) = 12.20; contribution =12.2-1.5-1 = 9.70; net take rate 0.485%. The gross charge is higher because interchange is higher, but interchange and scheme fees pass through, so the acquirer keeps less (0.61% of volume before costs, against 0.85% in Worked example A).
• C2: break even requires (1-Share)*1.5%*1000 >= 8, so the maximum share is =1-8/(1.5%*1000) = 46.67%. At low rates the issuer cannot afford to pay large platforms the 50% they earned at higher rates; platforms with many users can demand most of the reserve income, or issue their own coin.
• C3: a good answer names consumer credit (REG-06 and the member state's transposing law, applied from 20 November 2026), payment services and safeguarding for collecting repayments (REG-01), stablecoin issuance or distribution in the US (REG-08, effective date in section 20), operational resilience in the EU (REG-09) and anti-money laundering rules in both markets. Questions for counsel: does our product fall within an Article 2 exclusion; which licence or partner carries the credit; who is the issuer and who holds reserves; can our rewards be treated as interest; what changes when the PSR and PSD3 apply.

Self-test:

1. Interchange and scheme fees (pass-through), then processing cost and fraud and chargeback losses.
2. 0.725% (=14.5/2000); a 10 basis point cut removes 2.00 (=2000*0.1%), about 14% of contribution.
3. Average receivables are only six fifty-seconds of annual volume (57.69 on 500), so funding cost is =6%*57.69/500 = 0.69% of volume.
4. Break-even loss rate equals fee revenue minus funding and servicing, divided by volume: =(20-3.46-2.5)/500 = 2.81%.
5. =8/((1-50%)*1000) = 1.60%; the issuer keeps only the share of reserve income not paid to partners, so a higher partner share raises the break-even yield.
6. It is earned by investing money held for customers in interest-bearing assets and moves with short-term rates, like a bank's deposit margin, not with transaction volume.
7. In a two-sided market, the network chooses how to split the total price between merchants and cardholders; interchange shifts cost to the merchant side to attract cardholders and usage.
8. Digital footprint variables, such as the device type or email provider used when ordering online.
9. Doubt about whether reserves can meet redemptions at par, which leads holders to redeem at once; Diamond and Dybvig (1983) model the same self-fulfilling run for banks.
10. Regulation (EU) 2015/751: 0.2% of the transaction value for consumer debit cards and 0.3% for consumer credit cards (Articles 3 and 4).
11. Not law: the Parliament committee approved the negotiated text on 5 May 2026, the plenary vote was listed as indicative for 14 December 2026, and the texts were not in the Official Journal.
12. On the earlier of 18 months after enactment (the Act was approved on 18 July 2025) or 120 days after the regulators issue final implementing regulations (section 20).

Revision history

Standard and licence note

Based on standard payments, lending and financial intermediation economics, the primary works listed above, and the public legal texts and regulator pages named in the regulation map, checked on 2026-10-30. The text, the unit economics, the numbers and the exercises are original; no textbook, course material or published case is copied or paraphrased, and Varnelle Pay, Varnelle Digital and every number in this card are fictional. Laws are summarised in original words with article and section numbers; they are not quoted at length. The template is independent and not affiliated with or endorsed by any regulator, payment network, bank, business school or publisher. Payments and digital asset rules change often: check the current official text and a qualified professional before you rely on any row. This is not legal, regulatory, investment or financial advice. Template licence: MIT.