
Why is everyone a bank? - kaushikktiwari
https://medium.com/@kaushikktiwari/why-the-f-k-is-everyone-a-bank-6576de9d262d
======
tlb
Another answer: because regular banks are awful to deal with. They don't have
nice APIs to just move money around. They apply velocity limits at surprising
times. They can terminate your account suddenly for opaque reasons. They
charge high regular fees and even higher "gotcha" fees if you make a mistake.
They can take back money sent to you for up to 90 days, but often can't get
back money you sent to crooks even if you discover your error the next day.
And 100 other complaints.

So if you're doing something involving moving a lot of money around, you may
need to be your own bank to make the whole system work well.

~~~
vanniv
Honestly, I wouldn't trust Google (or any other tech giant) to be my bank.

My bank doesn't have a history of locking people's accounts when they post
"the wrong" political opinions online.

My bank doesn't have a plan to monetize access to my account, or to limit use
of the account to only those activities of which the bank's army of woke
employees approve.

I think I'll stick with a real bank, thanks.

~~~
sroussey
Oh, so not true. Banks often close accounts of types of people or businesses
they don’t like at the moment. Just ask a PE/VC with a BofA account!

~~~
vanniv
That, though, is mostly about risk management -- and even if they close your
account, you get the money back.

(I also would never do business with Bank of America, because they're awful
and they hate their customers even more than Wells does)

But even BofA doesn't do things like read your Twitter posts and YouTube
comments so they can blackhole your account if you have have the wrong
politics.

The tech giants, on the other hand, will seize your stuff in a heartbeat if
you step out of Silicon Valley's definition of acceptable beliefs and
opinions.

My credit card works at any merchant -- and the fees are the same. I don't get
hit with a temporary ban if I buy a Chick-fil-A sandwich, for example.

~~~
solveit
> But even BofA doesn't do things like read your Twitter posts and YouTube
> comments so they can blackhole your account if you have have the wrong
> politics.

Yet.

------
v4dok
Another asnswer: Because the people making the business decisions in these
companies is the only thing they can do.

When you have no vision as a company or no visionary in your team, you get
served by the countless consultants and ex-bankers who went to big-tech
because of its the new Wallstreet. Of course, they have no idea what Tech does
and is and of course no clue how to provide something of significant value.
Instead, they steer the companies into direction where is familiar to them
through their finance classes and/or their Private Equity, Venture Capital
backgrounds.

The fact that everyone wants to become a bank is not engagement, is not
profits. Its a sign of a failing economy where capital decided that the best
thing it can do is to invest in itself.

~~~
TrackerFF
Also: Debt is cheap these days, and regular people are in desperate need of
cash - so it's a sellers market.

Where I'm from (Norway), we've seen an explosion in these offshoot banks - i.e
consumer loans / credit card providers. Airlines, big box electronic stores,
etc.

Ans surprise, surprise, many of these banks are raking in cash. And triple
surprise, defaults in credit cards / consumer loans have also exploded.

It should also be mentioned we have some of the most creditor-friendly laws /
system in the world. It's almost impossible to get rid of debt, because
there's an automated pipeline from banks to debt-collectors to government
instances that will do the final debt collection via wage and welfare
garnishments.

These banks will foreclose your house, repo your car, and whatnot on defaulted
/ outstanding debt as little as equivalent to $10 (but of course, by the time
many have noticed this, that measly $10 has grown in to thousands, through a
battery of fees and compounding interest of said fees).

I've been calling it for some time now: Our next global recession will come
from consumer debt and credit cards. Banks are handing out credit to anyone
with a pulse

~~~
Keverw
Yeah the whole credit thing is nice, but I wonder how many people are pay
check to paycheck with less than 1K in savings driving brand new cars, living
in a large house with a brand new iPhone and flat screen. Then when people are
closed to paying off their mortgage, they refinance or take out a second
mortgage.

However there is someone who says if you need a new car, only pay cash so if
you only have 500 bucks, get one off of Craigslist to get to point A to point
B but in a way I feel like that's bad advice as wouldn't be reliable and you'd
end up spending a bunch on repairs.

So I feel like credit is good, but in a way people use it for too much instead
of saving. My favorite idea is to just use credit cards no differently than a
debit card, don't spend anything you know you won't be able to pay off. Then
instead of paying banks, they pay you! Sounds like cashback is worthless with
interest. So I guess a different mindset than the majority of people, but the
credit card companies are probably hoping you slip up at some point.

Then as for credit in business, I feel like the best way to use credit is to
scale up something that is already working out for you... Maybe you need more
inventory because you are selling fast but still waiting on your supplies to
pay you, so throwing in a bit of credit you know you can for sure pay back
would help keep up with the demand.

I know some people hate credit, but having a good score might help you when
you get a job, auto insurance premiums, apartment but laws vary by states too
in what companies can use your score for. For example I know California
doesn't allow them to use it for auto insurance, and I think credit checks for
job applicants is limited too but Ohio doesn't care really what companies use
your credit score for.

So if you are 18, get a credit card just to treat yourself to some McDonalds
once a month, then pay it off fully when you get your statement you'd be
better off credit wise than someone who didn't have any credit at all. A lot
of stuff they don't teach in school, you can get a better financial education
on YouTube.

------
kccqzy
> It also happens to be an incredibly sticky product. Think of the last time
> you saw an overdraft charge on your statement and swore to yourself that
> this was the last straw — you are taking your business elsewhere only to be
> confronted with the downstream effects of moving your “financial address” —
> telling HR where to send the next paycheck, calling up each utility company,
> changing autopay for each credit card bill and so forth!

Here's the thing. The stickiness of a bank is only a mental illusion. If you
actually rationally calculate the time it takes to switch a bank, it's not
that bad. Changing where the next paycheck is deposited takes five minutes.
Changing where each credit card autopay draws money from takes five minutes.
Once you have resolved to leave a bank, it probably takes about an hour to
actually do it. (And for typical Americans that one overdraft fee is well more
than an hour's worth of salary.)

I find this interesting because it illustrates the difference between the
mental workload and the actual workload can be great. Coming up with a
checklist of a dozen places to change the routing and account number seems
overwhelming. It is actually not.

~~~
tikkabhuna
In the UK we have the "Switch Guarantee"[1]. It was setup when there was
stickiness in current accounts (English term for checking accounts). Now when
you sign up for a current account you can opt-in to this service and they do
payment redirection. So if someone tries to transfer your old account money,
it'll get forwarded onto your new bank. That's on top of them organising the
migration of payments.

1\.
[https://www.currentaccountswitch.co.uk/Pages/Home.aspx](https://www.currentaccountswitch.co.uk/Pages/Home.aspx)

~~~
m4lvin
In the Netherlands we have a similar service, but I am often surprised that
almost nobody knows about it and people hesitate to switch banks.

[https://www.overstapservice.nl/](https://www.overstapservice.nl/)

------
doppel
Related: In Denmark (where I live), we have an officially designated
"NemKonto" (translates to "EasyAccount"), which is where most employers,
public institutions, etc. put paychecks, payouts, etc. automatically. So if
you change banks, you can simply designate the new account your official
NemKonto, and the money will automatically be routed there - no need to
contact anyone.

This, in addition to how easy our PBS (DK version of ACH) is to use means
switching banks is something that can be done easily. I know of people who
will regularly contact 5-10 banks with their current mortgage details and ask
for a better deal, and then go back to their current bank and tell them "match
this offer or I'm switching".

We also have a simple interest on overdraft (usually 8-15% annually on any
amount over draft), though excessive overdraft will get your account locked.
But beyond that, no fees for hitting negative $0.05. Is there any US bank that
offer a similar fee structure? I imagine people would migrate in droves if
that was already the case.

~~~
cowsandmilk
> I know of people who will regularly contact 5-10 banks with their current
> mortgage details and ask for a better deal, and then go back to their
> current bank and tell them "match this offer or I'm switching".

That's common in the US and has nothing to do with ACH in any way. That's a
transaction where you likely would not use ACH at all and would use a wire
transfer.

> Is there any US bank that offer a similar fee structure?

Yes, there are many. One of my banks, Capital One, calls this "Overdraft Line
of Credit" and the current interest rate is 12.75%. They also offer "Next Day
Grace" where you have a day to cover the overdraft and "Free Savings Transfer"
where they just transfer money from your savings account as options as well to
avoid overdraft fees.

------
Apocryphon
Is this going to be the sort of phenomenon that we will eventually look back
as a signifier of the dumb money economic bubble we're in, similar to past
trends like the wild access to credit in the Roaring Twenties, the run up to
the S&L crisis in the '80s, the worthless tech IPOs of the Dot-Com Bubble, the
liar's loans of the 2000s, and another examples of rampant finacialization?

If the environment is one in which non-financial institutions can easily
create banks, easily find customers for their banks, and not invite regulator
scrutiny, does that mean behind the scenes something is going horribly wrong?

~~~
delfinom
The tech companies aren't even underwriting the accounts. They are just
resellers of accounts from actual banks, throwing on a fancy web interface and
then data mining your transactions.

~~~
Apocryphon
I'm not exactly claiming that Robinhood checking accounts or the Apple Card
will blow up Goldman Sachs and kick off the next recession, but it does feel
like that if we're at the point where companies unrelated to finance are
jumping into it just because it's easy to, we're in a time of irrational
exuberance. Extravagantly so.

~~~
derp_dee_derp
Can you explain why you think Robinhood is unrelated to finance and is jumping
into it just because it's easy to?

~~~
Apocryphon
Not the best example, perhaps, but a stock brokerage app getting into banking
(especially with shady marketing [0]) feels like feature creep.

[0]
[https://news.ycombinator.com/item?id=18699995](https://news.ycombinator.com/item?id=18699995)

~~~
jonas21
Really? I'm struggling to think of any major stock brokerage that doesn't
offer banking services.

~~~
Apocryphon
One wouldn’t normally consider an app-based brokerage, six years old and less
than 500 employees, to be considered a major brokerage.

Is it common for boutique brokerages to offer banking?

~~~
jonas21
I'm not sure why you consider Robinhood to be a boutique brokerage or what
having an app (as opposed to... physical locations?) has to do with anything.

They have over 6 million accounts, which is more than E*TRADE and within a
factor of 2 of Charles Schwab or TD Ameritrade. And these brokerages
apparently felt enough of a competitive threat that they all adopted
Robinhood's commission-free model.

Regardless, even if you don't consider Robinhood to be a major brokerage, they
clearly aspire to be one, so offering banking services makes perfect sense.

~~~
Apocryphon
Guess I underestimated them based on their youth and company size. Didn’t know
they had disrupted the market so quickly. If jumping into banking services is
an industry convention, I suppose that goes to show that even a brokerage of
Robinhood’s age and size must have the stability and temperament to provide
reliable banking services that customers can trust despite their breakneck
Silicon Valley startup ethos and lack of prior experience in checking.

------
belorn
Looking at the situation in Sweden, I would say the cause is the bank
themselves. Banks here are currently trying to remove every aspect of the
banking industry that is not a digital service. Offices are a cost center.
Physical money are a cost center. Talking with customers is a cost center. By
shedding all those cost centers the bank can focus on the parts that make most
money and raise stock value.

Google, Apple are likely looking on and discovering that digital products is
something which they too can do, and their size allow them to jump into the
same market. All the parts of the banking industry that would prevent them is
exactly the same parts which the banking industry is removing.

~~~
LudwigNagasena
Cost/profit center is such a bogus concept. I can’t believe almost all big
companies use it.

------
_bxg1
The points make well enough sense, but the author is also the professed
founder of this: [https://betterbank.app/](https://betterbank.app/)

~~~
kaushikktiwari
does that make the points less valid? I felt it added to the credibility of
the piece? Looking forward to your criticism on that

~~~
scott_s
No, it does not make your points less valid, _if_ they are valid. But it is
reasonable to assume that the arguments of this piece form the foundational
assumptions of the product you are selling. People will want to take this into
account when considering your arguments.

~~~
kaushikktiwari
You are right! This one is more of a general overview of the space. I will
write one about the assumptions we are making wrt to betterbank.app

------
jimbru
It's easy (and fun) to complain about the bad (or just weird) product
experiences that banks regularly churn out. Believe it or not, most banks are
trying their best. But as other commenters have noted, banks aren't staffed by
technologists, so their choices for how to solve these problems begin and end
with buying one of the available off-the-shelf software products. Spoiler
alert, these products generally are both expensive and not very good.

If you want to understand the toolkit bankers have at their disposal, take a
look at FIS, Fiserv, and Jack Henry. These three companies represent
approximately $170 billion in market cap. Your interactions with your bank,
whether it's a click in an app or a conversation with an actual banker, almost
certainly bottom out with a call into one of these company's software systems.
These systems are (almost) all mainframe software originally designed in the
1980s. Every product the bank delivers is built on this shaky foundation,
which results in all sorts of workarounds and weirdness at every layer of the
stack.

That all worked fine back in the '80s, but in the decades since, not only have
our expectations changed (most bankers don't know what "API" stands for, by
the way), but also banks' regulatory reporting requirements have expanded
dramatically. Governments wants to know (very reasonably) that a terrorist or
money launderer won't be able to make payments. But when you mix in the
inertia of old enterprise software and the relative dearth of good
alternatives, the result is a broken product experience (like the random
velocity controls like @tlb cited above).

Being a bank is big and complex. And since deregulation and the Internet
happened, being a bank is no longer about geography (remember branches?), it's
about software and product. This seems like a pretty natural fit for a
startup: break off a desirable chunk of the bank's customers and deliver a
modern, specialized solution that's 10x better. There's ~$12 trillion of bank
deposits in the U.S., that's a lot of market to go after.

* * *

Full disclosure, my company, Treasury Prime
([https://treasuryprime.com/](https://treasuryprime.com/)) sells software to
banks so that we can expose developer APIs for banking. If you have a fintech
startup and you need a bank partner with good, modern APIs, email me:
jimbru@treasuryprime.com.

~~~
acjohnson55
I have to imagine that you get used a bunch in the backends of FinTech
products, but any chance better IT starts to reach consumers? My inability to
know _exactly_ what's going on with my money on my own terms is endless
frustrating. The aggregators help, but are still quite limited.

~~~
TeMPOraL
I don't think the new breed of fintech startups is going to help here much.
The reason you can't see what's going on with your money on your own terms is
because banks want you to use their software in order to upsell you financial
products. The articles point out that the new fintech companies are also
interested in exploiting the stickiness and eyball-attracting aspects of
banking, if not for direct upselling then for something else.

------
Lucadg
Fintech only provides better UX on the same old system of banking. The real
issue with banks is the staggering amount of regulation which acts both as an
innovation killer and as a high barrier to entry, which in turn stifles
innovation even more.

It's the golden cage dilemma banks find themselves into.

Fintech looks cool until it stops working, then you discover it's the same
system, only run by a startup.

------
hcarvalhoalves
Everyone is a bank today for the same reason everyone was a social network in
the 00's.

A few startups started encroaching into financial services territory, took all
the risk (including regulatory), and now that it's clear it's something worth
pursuing Big Tech is following, expecting to leverage their existing
products/services/ecosystem to lock you in by yet another aspect your life.

~~~
Apocryphon
As the engineer and writer Alex Payne put it, these startups represent “the
field offices of a large distributed workforce assembled by venture
capitalists and their associate institutions,” doing low-overhead, low-risk
R&D for five corporate giants. In such a system, the real disillusionment
isn’t the discovery that you’re unlikely to become a billionaire; it’s the
realization that your feeling of autonomy is a fantasy, and that the vast
majority of you have been set up to fail by design.

\- No Exit: Struggling to Survive a Modern Gold Rush (2014)

~~~
thundergolfer
That’s an interesting perspective. Related to it, I often feel like
entrepreneurs in tech don’t realise how much their innovation is restricted by
capital markets.

OP’s startup is actually a great example of this. Medical debt is indeed a
troubling problem in the USA, but OP’s solution is yet another financial
product, something that can get funded. VCs can’t fund single-payer healthcare
policy entrepreneurship even if that’s actually what would solve the medical
debt problem.

~~~
kaushikktiwari
That's a very good point! I agree!

------
christkv
I dread the raise of the tech company banks. I think we need EU level
regulation to ensure you are not orphaned by companies that decide they don't
want you legal business because you offended some third party that is applying
political pressure to the bank. A digital and financial rights charter.

------
buboard
Because there is so much free cash it's easy to build one just to pass your
cash to your grandkids?

Ironically, fiat coins and banks are going to become so virtual , that bitcoin
will look real in comparison.

also ironically, the author makes another bank

------
Apocryphon
You know what also provides most of the services of a bank? A credit union.
Why aren't companies launching those?

~~~
rolltiide
Because they don't want to. Why would you want your members to be a part of
it, just sticks with the super low interest rates, fractional reserve, rampant
speculation and all of the profits

------
aj7
There are only two uses cases left for money center banks. (1) You might be
able to get a branch safe deposit box. (2) Same day payment on credit cards,
that bank. Fidelity, and perhaps other zero fee brokerage accounts handle
everything else.

~~~
kccqzy
Does Fidelity allow you to deposit cash?

~~~
patio11
"Integrated cash management" (a debit card, etc) is abundantly available from
discount brokerages, and is systemically important to their businesses.
Fidelity legally can't call it a checking account so they call it a Cash
Management Account; brokerages that own banks (Schwab, etc) just call it
checking.

~~~
kccqzy
You did not answer my question. As far as I can see, the Fidelity CMA allows
you to withdraw cash using their debit card, but I see no way to deposit cash.
Nor does it provide features like cashier's check.

------
majormjr
This article seems to just be an advertisement for the authors new bank
account?

~~~
kaushikktiwari
its not an advertisement my friend. Just explaining how I see the world as
someone who is working in it. Tried to be as unobtrusive as possible!

~~~
perspective1
I'm with you. You're contributing a thought piece and unobtrusively include a
link to your bank at the bottom. It's not overtly biased, and it's neat you're
getting attention for your banking app by, instead of describing it, simply
saying you're doing something "interesting."

I think, by focusing on the $5000 emergency cash proposition, your customer
segment will generate more costs and hassles than their debit card fees and
whatever interest spread you eek out in today's world. You'need a way for your
customers to generate more value-- what have you thought of? Ads?

~~~
kaushikktiwari
thanks perspective1! I find overt self-promotion to be distasteful, so glad it
came across well. We are using the interchange fees to pay for the $5000
emergency fund, they have to move their direct deposit over to switch "ON" the
safety net. We do break even based on our current estimates of annual spend
and claims, but looking at a few different ways, upselling insurance is the
big one! Will write about it and make sure to post on this comment thread!

------
netcan
I think the article more or less nailed it, but the topic probably deserves
journalistic attention of the kind journalists complain no longer exists.

The basic "fintech" startup theory is fairly reasonable:

(1) financial services have a lot of fat and/or profit.

(2) financial services is/should be a tech subsector. Debit/credit cards,
current accounts & such are nearly commodities, one is as good as another.
Apart from customer service, UX is all that differentiates them^, from a
meaningful subset of customers. That's software.

(3) The competition is soft. Many banks have terrible consumer facing
software, for example. Many have costly legacy structures.

------
rb808
Because it looks easy. And in an age where VC money doesn't care about profits
its easy to create a bank. When the fraud, regulatory compliance and low
interest rate horsemen come knocking most of these efforts wont last.

------
AllanHoustonSt
Is the overwhelming debit spending vs credit spending an emotionally charged
and risk averse rationale decision by the general populace or just unfortunate
financial illiteracy?

~~~
kaushikktiwari
Access is the big one, risk-averse because of being burned in the past. Even
missing a single payment means 25% APR+late fees, so likely to not put
everyday expenses on credit. Use it more for planned stuff, like travel etc.
The biggest irony is credit card rewards are a tax on the poor for the rich---
merchants jack up prices for all but the rich spend and benefit!

------
henron
The problem is that no direct to consumer fintech company has found a legal
way to make money other than 1) processing transactions 2) holding savings.
The examples of struggling companies in the article underscores this point.

------
Sophistifunk
Is that a trick question? it's because banks get to make money without doing
any work. It's a wonderful position to be in, the middle-man who just takes a
cut of everybody else's transactions.

~~~
Gibbon1
In 2009 the Fed tore down the wall between retail and investment banks. Which
allowed the Fed to pump the latter full of cash. Stands to reason that every
other large non-finance corporation wants to get in on that.

------
useful
Reminds me of a great talk my a16z about the holy grail is the bank account.

[https://www.youtube.com/watch?v=gK9owf0PSZU](https://www.youtube.com/watch?v=gK9owf0PSZU)

~~~
brooklyntribe
EVERYONE should watch this one. thanks:-)

------
otakucode
It has never, at any point since the introduction of electronic transfers,
made the slightest bit of sense for 'payment processing' services to charge a
fee which scales based upon the amount being transacted. Yet, every means of
transferring money has always come with a percentage-based fee. This isn't
just a simple matter of rent-seeking on the part of the financial class. It's
outright dangerous, and really shouldn't be tolerated by any government. The
cost to transfer money does not scale based upon the size of the numbers
involved. And as the vast majority of transactions overall in our economy are
now electronic, this puts payment processors essentially in the role of taxing
authorities. They have the power to counteract the monetary policies of the
government should they feel like doing so. Imagine if the Federal Reserve
decided to print more money in order to encourage lending or something like
that, but the CEOs of the largest payment processors disagreed. They could
simply raise their processing fees, making it more expensive for money to be
used, compensating and making the actions of the Fed ineffective. There is no
law preventing them from doing this, as far as I know, and it would have
immediate monumental impact on the economy.

That's a juicy target. Any company willing to clear those regulatory hurdle
gets to become not just a company, but effectively a taxing authority.

~~~
Turing_Machine
Hmm... it seems to me that the service is exposed to more risk for higher
transaction amounts (say, something is crooked, or just goes wrong and the
service winds up holding the bag).

That's not to say that the current fees are necessarily fair, but it does make
sense to me that larger transaction amounts should be charged more.

------
lordnacho
The thing you tend to hear about banking services is that everyone is
dissatisfied with them. This is probably why a lot of startups think they can
jump in and disrupt.

People should lend directly to each other, or have sensibly priced
investments, or people should have simple bank accounts that don't surprise
you with charges, or be able to change FX cheaply. Those kinds of ideas are
pretty easy to suggest for outsiders, and the answer is always "I'm gonna make
a website that's better than the incumbent".

To be fair, startup FS sites have tended to be easier to navigate, and
focusing on an area like FX does create a simpler user experience.

The question is whether any money can be made. For instance we now have a load
of challenger banks that have a slick app for sending money to people. But how
much is the customer actually worth? Do they stick around or open a whole
bunch due to it being so easy? Also what are you gonna upsell them on other
than the metal card?

What about the lending markets? How come Lending Club has issues making money
as the premier business in the direct lending category?

What about the investment businesss? Competing on price is generally something
they tell you not to do in business school, but that seems to be the main
value proposition as far as I can tell. I reckon Google could jump in here
though. They have credibility among the general populace as being pretty smart
with ML, and I bet they could morph their bank into a super hedge fund.

The FX niche, I don't know how TransferWise are doing, but it's fairly easily
encroached on by the challenger banks. The backend is fully commoditized, it's
a question if getting customers. Which is probably why TW are offering bank
account like services.

------
superkuh
When you're a bank you get rent from many economic transactions without
providing anything of value except being rich to start. And even better, if
you're a real bank, then you can create money out of thin air as debt on your
balance sheet via fractional reserve banking. There's effectively a universal
basic income for banks. What company wouldn't want to get in on that?

~~~
whatshisface
Thin air? What are all the employees doing then?

~~~
matheusmoreira
Yup, thin air. When people borrow money, the bank just creates the money out
of nowhere. That money doesn't actually exist until the debt is paid. Banks
are ultimately responsible for the extreme inflation of virtually all
currencies currently in use.

~~~
briatx
That is not at all how the money multiplier works.

[https://en.m.wikipedia.org/wiki/Money_multiplier](https://en.m.wikipedia.org/wiki/Money_multiplier)

------
venantius
If you're interested in this space, we're building a fully-regulated platform
bank to essentially power all of these consumer/business facing banking
applications.

This is us: [https://griffinbank.com](https://griffinbank.com)

------
Osiris
Some cryptocurrency communities push the idea of "Be your own bank",
especially with hardware wallets specifically because of this problem of
having to trust / rely on custodians.

My sister-in-law had her accounts frozen for a year for something a business
partner did. If she had all her money in her own hardware wallet, she wouldn't
have lost access to her funds.

Obviously, being your own bank is hard from a security perspective, which is
why most people are happy to outsource their banking to a custodian. Heck,
even crypto people outsource to custodial accounts like Coinbase.

~~~
asjw
Hardware wallets can protect your assets, but they can't protect you from bad
rep. People won't make transactions with you if transactions are monitored or
at risk (every business with someone having problems with the law are
hinerently risky)

Just like sanctions against states they could not freeze your accounts, but
they could prevent you from spending your money or collecting payments or
making regular business.

------
bsenftner
I've encountered several startups that have founded banks through American
Indian Reservations, instantly creating an international money laundering
vehicle, which they use as a tax haven for wealthy people while also being
able to create money directly by loaning it to separate corporate shells. This
may be "smart" but I steer away from anyone with this type of "strategic
thinking" because they are playing with fire.

------
lol768
> Think of the last time you saw an overdraft charge on your statement and
> swore to yourself that this was the last straw — you are taking your
> business elsewhere only to be confronted with the downstream effects of
> moving your “financial address” — telling HR where to send the next
> paycheck, calling up each utility company, changing autopay for each credit
> card bill and so forth

Isn't this what CASS is for? Is there really no US equivalent?

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AnimalMuppet
Because that's where the money is. -- Willie Sutton

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brooklyntribe
Sounds crazy --- I don't want to start a billion (trillion $$$) bank. What
happens if "my bank" has never more than $10,000 in total assets. Our loans
never go above $100. Do want to offer ATM cards, just we're nano-sized.

Do I somehow slip under all the banking laws? Just as an "experiment?" Is this
something that I could do? OR is it just a crazy idea?

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40acres
Traditional banks have a consumer tech problem. This has led to the rise of
Robinhood, Venmo, etc. Partnering with tech players like Apple and Google
allows them access to their customers.

Big tech wants access to financial services for a few reasons laid out in the
article in addition to FOMO and bypassing regulation.

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soapboxrocket
But they aren't banks, they are just partnering with banks and putting a
smooth veneer on top of old/greedy banks. The current trend seems very similar
to when retailers all launched their "own" credit cards.

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fuzzfactor
>Why is everyone a bank?

Seems to me that sensible ones would have more capital than they really need,
and it would be so poorly-performing that they can loan it out for better
returns than they would get using it for their own growth purposes.

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rkapurbh
Existing banks' customer service totally sucks. These tech-focused banks have
an enormous opportunity to just provided better customer service. Insightful
article, I never thought about interchange as a business model.

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themark
Isn’t it just data mining? I assume the big credit card companies aggregate
spending by vendor for their customer base and make projections about each
vendor’s quarterly revenues then sell metrics to hedge funds.

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wheybags
> for a large credit scarred portion of the populace, it's their primary
> spending account!

As a European, this sentence seemed weird. Why wouldn't it be? Do people not
use debit cards in the us?

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zeerev
It would be nice to have a system where you can avoid getting put on the
credit bureaus at all.

Be your own bank? No agreement to have your credit monitored by those toads.

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galkk
I was always wondering why Microsoft sunsetted MS Money and Google didn't
built something like that. This is a treasure of information

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StuffedParrot
Interest is profitable. You take cash, you make interest. It's just a step
away from the oldest game in the book—loan sharking.

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manishsharan
I work at a bank -- it wants to be a tech company. In fact a lot of banks
aspire to be a tech company merely selling financial products.

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biolurker1
Literally everyone could be a bank with Bitcoin

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cies
Not "everyone" is a bank. Some big companies can afford to be a bank.

Becoming a bank (or an insurance company) while it is actually not that hard
(information mgmt wise) is really expensive due to regulatory bumps. Thus only
big money can afford to start up banks (or insure'ers). These rules ensure
that you always have capitalists running these shows. Thus making the world
even more unfair. I guess the rules that make it so artificially hard to start
up in those sectors are prolly lobbied into existence.

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TurkishPoptart
I am very grateful for my local credit union. Six years and they haven't
fucked me over once.

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ivanhoe
Because banks are where the money is. (yeah, lame pun, but I had to write it
:))

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ggambetta
I can't see a pun there. Am I missing something?

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zhte415
The article doesn't touch this, US-centric, but I feel worth mentioning is the
EU's PSD2 (Payment Services Directive 2) which is driving a lot of consumer
banking Fintech/Regtech.

An article from 2016 which I think gives the best tl;dr especially
highlighting the roles of ccount Information Service Providers (from
roboadvisors to replacements of traditional 3rd party transaction layers such
as Visa) and Payment Initiation Service Providers (which essentially turn any
traditional bank into a whitelabel product)
[https://www.finextra.com/blogposting/12668/psd2---what-
chang...](https://www.finextra.com/blogposting/12668/psd2---what-changes)

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known
"Heads I Win; Tails You Lose" \--Banks

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NN88
sounds like we need more taxes cause these balance sheets are way too high

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ecopoesis
Because in capitalism there are really only two things that make money: real
estate and finance. Everything else is just combining real estate and finance
in interesting ways.

McDonalds is a real estate company that happens to make burgers.

The traditional car manufacturers are banks that happen to build cars.

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znpy
> Why is everyone a bank?

Banks usually make a shitload of money, I guess.

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vernie
Because that's where the money is.

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aj7
“It’s the dominant payment method when it comes to everyday expenses — think
milk and diapers at the supermarket or a quick bite at the corner deli.”

For financial ninkompoops.

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kaushikktiwari
too harsh brother, I agree it makes way more sense to use a credit card and
pay it off immediately. It's just not that easy for a lot of people.

