Float Economics
Float economics refers to the yield generated on customer funds held in FBO or custodial accounts during the period between collection and disbursement.
Float is the period during which payment platforms hold customer funds — between when funds are collected and when they're disbursed. At meaningful program scale, the aggregate daily balance held in float generates significant interest income.
Float yield in embedded finance: at 4.5% Fed Funds equivalent, $10M average daily balance generates $450K annually. $50M balance generates $2.25M. For large embedded finance programs, float yield can rival or exceed interchange revenue.
Who captures float: in BaaS arrangements, float yield typically accrues to the bank and is not shared with the platform. In direct bank relationships, float yield is a negotiable term — platforms can negotiate to receive some or all of the yield on their customers' balances.
Float optimization: yield depends on account structure (FBO accounts at Fed member banks can earn IOER), investment policy (how balances are invested), and contract terms (what percentage of yield flows to the platform). Most BaaS programs leave all float economics with the bank because the contract didn't address it.