I just read about a woman who was horrified to discover that she had spent her rent money on one 20-minute Uber ride. The story involves a birthday celebration, a “cab” ride home, and a realization the next morning of what she had done. Distraught, she posted her plight on the crowdfundng site GoFund.Me, raised $512 in 12 hours and solved her problem.
Here is her Uber receipt and what she said on Instagram.
The media focused on her anger with the Uber fare. Since we have already applauded Uber’s surge pricing here, my thoughts were drawn to how she got her money.
A Financial Infrastructure
Just like a transportation infrastructure moves people and goods on the ground, in the water and in the air, a financial infrastructure also helps things move. However, because money and credit move around a financial infrastructure, the network is a bit tougher to imagine.
If you want to picture how money travels around a financial infrastructure, you could think of the mid-19th century bonds that were sold to investors in the U.S.and abroad. Through investment bankers like J.P. Morgan who we would call financial intermediaries, investors got the bonds and the railroads got their money.
Or, you could think about how 1920s legislation limited the reach of a bank to its home state. That meant some states had more money than others for home mortgages. Responding, the federal government established Fannie Mae. As a national institution, it could create a more extensive financial infrastructure through which home mortgage money could flow.
Our Bottom Line: The Importance of Financial Intermediaries
How does all of this relate to Uber and a distraught young woman? We can say that the imaginary tubes that compose our financial infrastructure are now connected to firms like GoFund.Me. Just like a bank is a financial intermediary, so too will GoFund.Me pair people who have some extra money with the individuals and businesses that need it.