
Blue oceans for banks - brickcap
https://docs.google.com/document/d/1MCK1_mA22b5XPwoN0cGTYTBiVx0dGaF1c8DwnbhGRvs/edit?usp=sharing
======
cs702
The very smart, very shrewd, hard-working folks at Simple tried building a new
kind of bank... and found out that the business of banking is FAR more
complicated than it seems. Ultimately, Simple decided it would be best to sell
to a giant established bank, BBVA (USD 800 billion in assets):

[https://www.simple.com/company/the-next-
chapter](https://www.simple.com/company/the-next-chapter)

The OP is a short ambitious document written by two guys who think they can do
better. They think they can build a new kind of "bank for tourists." So far,
they have a landing page and a mobile app:
[https://www.wrinq.com/](https://www.wrinq.com/) ...They will need a lot of
luck.

~~~
tiatia
The paper contains a lot of bullshit and I don't see any new idea in it.

Foreign transaction costs are not "prohibitive" expensive and there are CC in
the US with no foreign transaction fees. You can use transferwise or WU in the
worst case (just wired a buddy who is broke US$ 300 online). Social network
and payments? Use Wechat!

There are three major problems that they won't be able to solve.

1\. KYC regulations

2\. Fraud. The financial industry makes it more difficult and more difficult
to access your own money (e.g. require a receive text message to wire money.
Good luck with that abroad)

3\. "in multiple currencies and fast unrestricted exchange of funds within the
internal banking network"

This is not a problem as long as your stay within ONE country. Use Wechat in
China, use M-Pesa in Kenya etc. It becomes a problem when you do it
internationally because many countries are heavily regulated and afraid that
capital leaves the country. Have you made, as an average person, international
transactions with China? India? Sri Lanka? Ethiopia? Good luck buddy!

In fact, even getting cash at the ATM abroad becomes more tricky. Recently I
got into the habit of just carrying cash for all my travels after I run nearly
out of cash twice (Ethiopia and India). What do I carry? Euros! They did not
want my dollars in Ethiopia because they were "not the latest series"
(remember point 2?)

~~~
brickcap
The website is out of sync with our ideas. We need to update it. Apologies for
any confusion caused.

If you don't see any new idea then can you at least see a concept that has
been proven already by revolut. If so can you see a possibility that this
concept can be taken further to include other businesses and banks? If you do
can you can you imagine a scenario where ideas we suggest might be probable?

And if we are able to overcome the challenges you put forth would you say that
this idea is a winner?

------
brickcap
We've compiled a list of questions that Banking partners,investors and startup
mentors and other people have asked us in the past. If nothing else the
document is a good overview of how the concept has evolved during the last
couple of months. We're constantly updating the list as new questions come in.
Here's the link:-

[https://docs.google.com/document/d/1cu7vl4GiQHg8Tqqt_nGj7JOT...](https://docs.google.com/document/d/1cu7vl4GiQHg8Tqqt_nGj7JOTfZlT3p-pFLZv7dy02DU/)

~~~
brickcap
Our two part plan for corporate banking innovation:-

\- The low hanging fruits in corporate banking services
([https://docs.google.com/document/d/11SRXfuC0-L5iGlHypnviI9H5...](https://docs.google.com/document/d/11SRXfuC0-L5iGlHypnviI9H525M3ffhQ6_fxY5l7250/edit?usp=sharing))

\- A scalable banking proxy
([https://docs.google.com/document/d/11SRXfuC0-L5iGlHypnviI9H5...](https://docs.google.com/document/d/11SRXfuC0-L5iGlHypnviI9H525M3ffhQ6_fxY5l7250/edit?usp=sharing))

------
jtchang
I think the article is missing an important point. Why are there foreign
transaction fees in the first place? Also I think that any large service is
semi doomed because of the governments in each of the countries you plan to do
business in. They want to protect their own banks.

~~~
schappim
You're right, however there is a possibility it will play out like Uber. I.E.
Many of the states across the globe initially fought hand and tooth to protect
their own taxi license systems, only to loosen up later...

~~~
notahacker
The financial stability of their economies wasn't dependent on taxi firms.

------
amelius
Financial services are a commodity, and that is a good thing. They should face
it.

------
cloudjacker
I don't like centralized versions of cryptocurrencies, but they provide the
rails and on ramps to lower transaction costs. Ripple, Stellar and Tether are
fascinating additions to the cryptocurrency and banking space

Tether providing stable value for settlement

I think people wouldn't come up with ideas like wrinq if they were aware of
existing solutions to build on top of

And I say that as a consultant who has seen many potential founders scrap
their idea, after I sign their NDA and they finally tell me about their
supposedly original idea only for me to tell them the existing solutions

It's fine to be unoriginal but they scrap their idea.

------
bachback
ever heard of cryptocurrencies? no banks are neeeded, and identity on
blockchain will actually happen.

~~~
aminok
Cryptocurrency is the only way to circumvent the prohibitionist laws against
free exchange of money. The biggest source of inefficiency in the global
economy is the organized censorship of human economic activity via state
intervention, and cryptocurrency directly addresses that.

~~~
tiatia
I tend to agree.

------
easytiger
> PPI

Doesn't know anything about retail banking if you are reusing that term

------
datahack
Yea. Came here to say what the previous commenter said. This basically sounds
like Revolut.

~~~
brickcap
Yes both Revolut and centtrip have marketed their products to only consumers
(travelers) where as the concept of multicurrency accounts is very useful to
business as well. Not just individuals. The customer acquisition strategy is
like Revolut but the larger goal is not (Not that I can say what they have in
mind,long term).

~~~
germanier
Revolut just announced business accounts.
[https://business.revolut.com](https://business.revolut.com)

~~~
brickcap
Ha! didn't know. Any way Revolut works in partnership with barclays. There are
other banks to whom the service will be valuable.

Out of curiosity by just do you mean today?

~~~
germanier
I think it was at the start of this week.

They use Barclays as their backend but is anything of that visible to their
customers?

~~~
brickcap
It should be on bank statements and on the card. What I was trying to say
though was that the fact that Barclays has a system like Revolut is a problem
for other banks that don't have a system like that. So our solution is still
valuable for them.

~~~
neximo64
The idea of using Barclays, or any 3rd party bank, is just to get enough
traction so they have their own participation method later. Also it doesn't
show Barclays on the statement from my usage - it shows the end merchants
details. I didn't really know it was Barclays till now.

Barclays has been known to help startups by lending them their (global)
infrastructure in the UK. Another Example is Dopay where Egyptian Barclays
ATMs have been lent out.

The Bank of England is moving towards allowing non banks to participate in the
payments system by 2020, its supposedly blockchain secured so it goes a notch
above what a sole bank/firm could do. Revolut could theoretically switch from
Barclays then.

~~~
brickcap
You misunderstand me....

You can think of revolut as a front end for barclays client pool account. This
is a very simplistic explanation but what I'm trying to emphasize here is that
the money revolut manages is effectively with Barclays.

So the idea of having Barclays is not to get traction or to have their own
participation method later but to have the muscle of a bank that can handle
large scale international payments.

There are other big banks who don't have something like revolut. So our
solution can be a good proposition for them (Not saying that we don't have
ideas for any new features. We do, but we've been caught off guard by the new
announcement. It'll take a few more days to make it's way to the pitch)

>"Barclays has been known to help startups by lending them their (global)
infrastructure in the UK"

Yes, but why? Barclays profits with every customer that revolut brings/ will
bring. Other banks would want to profit in a similar way.

I didn't know about BOE but I don't think that switching banking partners
after about 5 years of operation is going to be that easy... Not sure could be
wrong.

~~~
neximo64
> Yes, but why? Barclays profits with every customer that revolut brings/ will
> bring. Other banks would want to profit in a similar way.

Actually they hope the startup does well so they can buy them later. Revolut's
cost of acquiring a user is far less than Barclays (<£10 vs £300+).

Barclay's deal isn't free, they take equity in exchange for letting startups
using their infrastructure, it's not that expensive considering what they give
though.

I think I know what you're getting at, at replacing the Correspondent bank
system. There's another one, Transferwise, that seems to be getting
transaction where Banks in other countries use it internally to avoid
correspondent banks (transferwise often matches transfers to avoid transfers).

The BoE's 2020 system isn't for an ordinary firm to replace a banking partner.
It's to join the payment network and have an account backed by the
BoE/blockchain without it being at a designated high street bank. It wont be
easy to use I guess, but it would be compelling enough for a Fintech company
to use it.

I can see alot of value with the service you're describing, I don't think the
level of value would be high out of countries which have high legislative
requirements/forex controls. I had a similar idea a few years ago and my base
assumptions were incorrect regarding people's needs for my service.

~~~
brickcap
Thanks for the great explanation about acquisition costs. I think we can use
it :)

------
vidarh
Since they mention airlines: Norwegian (the airline) started it's own bank:

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

~~~
tiatia
This has very likely tax reasons.

Many major companies have their own banks and even insurances. An insurance is
an easily available tax shelter.

~~~
nickpsecurity
I'm sure there's tax benefits but wouldn't it also reduce fees and increase
flexibility due to founding company's control of bank?

------
Cypher
Sounds like markets succeed by creating monopolies... like cable providers...

------
neximo64
Sounds a lot like Revolut.

------
pja
There ain’t no hubris like FinTech startup hubris.

~~~
dang
Maybe so, but please don't post dismissive swipes to HN. It degrades
conversation quality and encourages the habit of rejecting new work or new
ideas.

It's true that most new work and new ideas won't amount to anything. But those
that will, almost never look like they will when they're incipient. So if we
don't want to trample on new things of great potential value, we have to
adjust our response to _all_ new things, including the ones that seem lame. It
takes a certain discipline to practice that suspension of judgment, and we're
hoping to cultivate that quality here.

~~~
pja
Fair point dang.

OK: To expand. FinTech startups seem particularly prone to some form of the
“the bits of a business I can observe from the outside are obviously shit, so
all I have to do is re-create better versions of those & the customers will
flock to me in droves & I can take over the world” fallacy.

Be as positive as you like, but any proposal that doesn’t at least nod to the
wider issues is going to make me instantly suspicious that the founders don’t
actually understand the banking system as is, or the reasons why it’s
structured that way.

Here’s a small list of issues that I’d like to see covered in at least some
fashion in a FinTech proposal, but are often glossed over or completely
omitted. I’m sure others could think of more.

* Banking is heavily regulated whilst at the same time being the target of some of the most persistent and talented fraudsters on the planet. (Paypal burnt through, what, a $billion or so in fraud whilst trying to establish themselves?) You want to be a global banking solution? You’d better have a damn good idea how you’re going to deal with fraud.

* Did I mention that banking is _heavily_ regulated? Your product brief had better demonstrate how you fit within the existing regulations. Failure to understand this will be terminal for your company (Where by terminal I mean: the execs risk going to prison and / or large fines. The SEC does not mess about.) Move fast and break things is not a valid strategy when ordinary people’s money is at stake.

* US FinTech startups are particularly prone to thinking that the rest of the world has a banking system as broken as the US one. Nothing wrong with trying to fix the US system but if you say you want a billion customers? You’re going to have to take a decent chunk out of the world’s population, which in many cases already has a perfectly decent banking system: Fast same day payments, very low fee international transfers, no-load payments in foreign countries, the works. Don’t think that the rest of the world works like the US.

* Every transaction is two sided - banks are middlemen - so your wonderful product had better appeal to both sides if it’s going to be successful. It’s pretty much doomed to fail if it only benefits one party in a transaction. If your plan is full of details about how wonderful your product is for people making purchases but very light on anything that would appeal to vendors (or vice versa) then I’m going to think that you don’t understand what makes payment systems successful.

* Banking is as much about reputation and credit management as it is about the boring details of money transfer. What allows me to buy things at a distance without cash is that my bank stands behind me and tells the vendor that my credit is good. If your bank is going to do that for me, then _they_ have to have the standing to do that with the vendors I wish to purchase from. Can your FinTech payment system product do this? If not, it’s going to fail.

etc etc.

