Float income
Your sponsor pays you interest on user money. That interest is revenue.
By Solomon Ajayi · Free to read, no signup
Your FBO account at the sponsor bank earns interest, paid monthly. On a ₦100,000 average daily balance at 6% APR, that's about ₦500/month of interest. THAT'S REAL MONEY. Most neobanks treat float income as the largest single line item after interchange. The accounting question: when the sponsor credits your FBO with float interest, where does it go? Three policies exist, for simplicity, this lesson takes the most common: you keep it all as platform revenue. Booking it correctly preserves your sum(user wallets) = FBO invariant after sweeping.
The money sitting in your FBO is your users' money, but while it sits there the sponsor bank pays interest on the balance. That interest is float income, and at scale it is one of the largest revenue lines a neobank has, often second only to interchange. The accounting question is simple to ask and easy to get wrong: when ₦500 of interest lands in the FBO, whose money is it?
Under the common policy that you keep the float, the answer is that it is yours, not your users'. So you debit FBO and credit Float Interest Income, and you do not touch the user wallets, because the users did not earn it, you did. But notice what that does to the iron law from Lesson 30: the FBO is now ₦100,500 while the wallets still sum to ₦100,000. The invariant is temporarily broken, on purpose, and the ₦500 gap is exactly your float sitting in the pool where it does not belong long-term.
The sweep is what closes the loop. You debit Operating Cash and credit FBO for the ₦500, moving your earnings to where they belong and bringing the FBO back down to match the wallets. Skip the sweep and you do not lose money, but every monthly reconciliation shows a confusing drift you have to explain by hand. Do it religiously and the books stay clean.
Worked example, step by step
Set the stage: ₦100,000 of user deposits in the FBO
Aggregate of all user wallets is ₦100,000. The FBO at sponsor bank holds matching ₦100,000. Invariant: FBO = sum(user wallets). ✓
| Account | Debit | Credit |
|---|---|---|
| FBO at Sponsor Bank (1300) | ₦100,000.00 | |
| User Wallets (aggregate) (2000) | ₦100,000.00 |
FBO UP ₦100,000. User Wallets aggregate UP ₦100,000. Standard funding state from Lesson 30.
End of month: sponsor credits ₦500 float interest to FBO
Your sponsor bank pays interest on the FBO balance. ₦500 lands in the FBO. The money is YOURS (your policy: keep float as platform revenue), not your users'.
| Account | Debit | Credit |
|---|---|---|
| FBO at Sponsor Bank (1300) | ₦500.00 | |
| Float Interest Income (4700) | ₦500.00 |
FBO UP ₦500, sponsor credited the interest. Float Interest Income UP ₦500, recognized as revenue. CRITICAL: do NOT touch User Wallets here. The users didn't earn this; you did. After this entry, the invariant is TEMPORARILY broken: FBO ₦100,500 vs user wallets ₦100,000. The ₦500 gap is YOUR float, sitting in the FBO until you sweep it out.
Sweep ₦500 from FBO to Operating Cash
End of month accounting hygiene. Move your float income out of the FBO (where it doesn't belong long-term) into your operating bank account. Now the invariant is restored.
| Account | Debit | Credit |
|---|---|---|
| Operating Cash (1200) | ₦500.00 | |
| FBO at Sponsor Bank (1300) | ₦500.00 |
Operating Cash UP ₦500, your free cash grew. FBO DOWN ₦500, back to ₦100,000. Invariant restored: FBO ₦100,000 = user wallets ₦100,000. ✓ Skip this sweep step and your monthly reconciliation will show a confusing drift; do it religiously and reconciliation stays clean.
Takeaway
Float income, interest your sponsor pays on user money you hold, is the fastest-growing revenue line at most modern neobanks. Book it correctly: hit FBO + Float Interest Income, then sweep periodically to operating cash to restore the FBO = sum(user wallets) invariant. Three policy variants exist (keep all, pass to users, split), pick one explicitly and let your accounting reflect it. Forgetting to sweep doesn't lose money but breaks reconciliation; passing float to users without booking it is technically fraud (you're paying interest you never recognized as expense).
Practice this on a real ledger
Reading is half of it. Open this lesson in the lab to post the entries yourself against a real Postgres-backed double-entry ledger, with the validation on. Free, your sandbox is yours.