How JPMorgan, Visa, SoFi, and Coinbase Actually Make Money

Four companies, four ways of touching your money

The spectrum: from "toll road" to "casino"

The simplest way to understand these four businesses is to place them on a single spectrum, running from companies that never touch credit or price risk to companies whose entire revenue line rises and falls with an asset price.

At one end sits Visa, a pure network toll collector — it earns a fee on transaction volume and carries essentially no credit or market risk on its own balance sheet. At the other end sits Coinbase, whose core transaction revenue is a direct multiple of crypto trading volume, which is itself a function of crypto prices — the closer a business's revenue is to an asset price, the more its stock behaves like the asset itself. JPMorgan and SoFi sit in the middle: both are balance-sheet lenders that borrow from depositors and lend it back out at a markup, which means both are exposed to interest rates and to how well borrowers repay their loans — just at very different scales and stages of maturity.

JPMorgan makes money the way banks have for centuries, just at an enormous scale: it takes in deposits from consumers and businesses, pays those depositors relatively little in interest, and lends the money back out — as mortgages, credit card balances, auto loans, and corporate loans — at a meaningfully higher rate. The difference between what it pays depositors and what it earns on loans and securities is called net interest income, and it's the single largest driver of JPMorgan's earnings.

Two other revenue streams round out the picture. The Corporate & Investment Bank earns fees advising companies on mergers and acquisitions and underwriting new debt and stock issuance, plus trading revenue from making markets in bonds, currencies, and equities for institutional clients — both of which are far more cyclical than net interest income, surging when deal activity is hot and drying up when markets get nervous. And because JPMorgan holds loans on its own balance sheet, it has to set aside reserves for loans it expects won't get repaid — a cost that rises sharply in a recession and is one of the main reasons bank earnings are so sensitive to the economic cycle.

The catch: as a globally systemically important bank, JPMorgan operates under some of the strictest capital rules in the world, with the Federal Reserve's annual stress tests directly capping how much cash it can return to shareholders through dividends and buybacks.

Visa's business model is deceptively simple and, precisely because of that simplicity, one of the highest-margin business models in public markets. Every time a Visa-branded card is swiped, tapped, or entered online, Visa's network routes an authorization message between the merchant's bank and the cardholder's bank and collects a small fee — typically a fraction of a percent of the transaction — for making that routing happen instantly and reliably, anywhere in the world.

The crucial detail is what Visa does not do: it does not issue cards, does not decide who gets credit, and does not carry any risk that a cardholder fails to pay their bill. That's entirely the job of the issuing bank (Chase, Capital One, and thousands of others) that put the Visa logo on the card in the first place. Because Visa never underwrites credit, its revenue scales almost purely with transaction volume — global consumer spending, e-commerce growth, and especially cross-border travel spending, which carries higher fees than routine domestic transactions.

The catch: because Visa's growth is a function of how much people spend, not how much credit it extends, it has a structural ceiling that a lender doesn't — it can't accelerate growth by simply taking on more risk, and a chunk of its addressable market (cash-based economies) still needs to convert to digital payments before Visa can earn a fee on it.

SoFi is genuinely two businesses stitched together, and understanding both is the key to understanding the stock. On the consumer side, SoFi operates like a real bank — it holds a national bank charter obtained in 2022, which lets it take deposits directly and fund loans (personal loans, student loan refinancing, and home loans) from its own balance sheet rather than relying entirely on third-party warehouse facilities the way most non-chartered fintech lenders have to. That earns it net interest income in essentially the same way JPMorgan earns it, just at a fraction of the scale and with a loan book skewed toward newer, digitally acquired borrowers.

The second business is easy to miss but strategically important: SoFi's Technology Platform segment, built around its Galileo and Technisys acquisitions, sells the back-end infrastructure that powers card issuing and core banking for other fintech apps — meaning SoFi earns a recurring, largely fee-based revenue stream every time a customer of one of those other apps swipes a card or opens an account, regardless of whether SoFi ever interacts with that customer directly. This segment behaves much more like a software business than a bank, with margins and growth dynamics that don't move in lockstep with SoFi's own loan book.

The catch: the lending business is still the larger profit driver today, which means SoFi remains meaningfully exposed to consumer credit quality and to how quickly its still-young loan book performs through a full economic cycle it hasn't yet been fully tested by.

Coinbase's original and still-largest revenue source is transaction revenue: a fee charged every time a customer buys, sells, or converts crypto on its platform. This revenue moves almost directly with crypto trading volume, which in turn tends to surge when crypto prices are rising (and everyone wants in) and collapse when prices are falling (and trading activity dries up) — making it one of the more boom-and-bust revenue lines among any large public company.

Because that cyclicality makes transaction revenue an unreliable base to build a company on, Coinbase has spent several years growing a second, deliberately steadier revenue stream it calls subscription and services revenue. That bucket includes staking rewards (a cut of the yield customers earn for helping secure proof-of-stake blockchains), interest income on USDC stablecoin balances, and — increasingly important — institutional custody fees for safely holding crypto on behalf of large clients, including several of the spot Bitcoin ETFs launched by major asset managers. Custody fees get paid whether Bitcoin is up or down that week, which is precisely the kind of revenue Coinbase needs more of to smooth out its earnings.

The catch: even with subscription revenue growing, transaction fees still make up the majority of Coinbase's business, which means the stock remains, at its core, a leveraged way to bet on crypto trading activity rather than a fully diversified financial-services company.

Side-by-side: what actually drives each stock

Why this matters when you're deciding what to own

Lumping these four into a single "financials" or "fintech" bucket obscures the fact that they'll respond to completely different headlines. A Federal Reserve rate cut is a mixed bag for JPMorgan and SoFi (it can compress net interest margins even as it eases pressure on borrowers), largely irrelevant to Visa's network-toll revenue, and only indirectly relevant to Coinbase through its effect on risk appetite for crypto. A recession that raises unemployment is a direct threat to JPMorgan's and SoFi's loan books through higher credit losses, a milder headwind for Visa through reduced consumer spending, and unpredictable for Coinbase, since crypto has at times sold off with risk assets and at other times rallied on "digital gold" narratives during macro stress.

Understanding which lever actually moves each stock is the difference between reacting to news that matters and reacting to news that doesn't.

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