
The Uberization of Money - akg_67
http://www.wsj.com/articles/the-uberization-of-finance-1446835102
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bko
I think some of the claims are a bit over-stated.

For instance, I agree that the mortgage loan process is silly but it is
heavily supported by government agencies Fannie and Freddie, and that likely
won't go away. Sure, technology and the law will soon allow you to borrow
directly through a peer to peer model, but do you think anyone really would
lend you money for a 30 year mortgage for less than 4%? There may be a market
for less credit worthy borrowers that have trouble getting a mortgage now, but
politicians would surely crack down on that.

Sofi, which lends to very low credit risk students has been very successful,
but that's because there is some room in the rate which you would pay going
through Stafford loans (around 6-8%) so that makes sense. So there a student
can get a rate lower than the one-size-fits-all rate of Stafford loans but I
think that rate is too low for mortgages to allow for a more competitive
private market. There may be some room to better assess credit risk for
private student loans, but considering that 85% of student loans are public
[0] and there is a lot of regulatory uncertainty regarding Consumer Protection
legislation, I think that opportunity is limited.

In terms of investment advice, low cost ETFs already exist and are pretty
amazing for what they do. You can invest in a broad index, albeit passively
managed, at ~15 basis points (0.10%). I don't know anyone who is willing to
fall over themselves to manage your money for less.

[0] [http://www.huffingtonpost.com/mobileweb/2012/04/24/obamas-
st...](http://www.huffingtonpost.com/mobileweb/2012/04/24/obamas-student-loan-
push-guide_n_1450288.html)

~~~
Falkon1313
There's plenty of room at the lower end. Of course if you're already a
millionaire, investing and loans are easy. But if you only have $100, they're
not. Traditional investing and banking are designed to exclude the lower
class/working class, to prey on them, and to be a losing game for them.

Even if you can get by the minimum balance limits, when you have to pay a $10
fee to buy and a $10 fee to sell, you need to beat a 20% return just to break
even on a $100 investment, let alone make a profit. But without the fees and
the minimums millions more people could be investing a bit here and there and
growing it.

Predatory payday loans and rent-to-own businesses are enormous - even though
they depend on exploiting people who really can't afford them. If there were a
better alternative, millions of people might use it.

With the middle class shrinking, the market is growing.

~~~
bko
I agree that investing $100 in a stock isn't worth the time of a bank so the
$10 fee they charge to purchase an ETF is high, but I think that would be the
case for just about anyone because of the cost of even doing the book keeping,
statements, etc. For instance, every ETF I invest in, I get the prospectus in
the mail. That costs money to ship every year. They have to manage things like
proxies voting as well. It's just not worth it to a bank. The $0.15 a year (15
bp of $100) in fees won't even coverage postage.

Pay-day loans may appear sleazy but the companies that administer them don't
have very high margins. There are risks to those loans and the small nature
means that fixed costs are spread over a smaller base. You can review the
financials of public companies in this space. EZCorp [0] and Cash America
International [1] are in that space. Their last profit margins are 4.8% and
-0.95%, respectively. Why are they so low? I don't know, but I don't claim to
know enough about this market to make broad statements about exploitation or
abuse. I just know that, like many markets in the US, there appear to be a low
barrier to entry and competition eventually shrinks margins.

Maybe you're right and they're doing some kind of financial trickery to appear
as though they aren't making enormous profits, but if you believe that, by all
means, enter the industry and change it from within.

[0]
[http://money.cnn.com/quote/quote.html?symb=EZPW&source=story...](http://money.cnn.com/quote/quote.html?symb=EZPW&source=story_quote_link)
[1]
[http://money.cnn.com/quote/quote.html?symb=CSH&source=story_...](http://money.cnn.com/quote/quote.html?symb=CSH&source=story_quote_link)

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MichaelBurge
I'd be terrified to entrust my money to a startup 'disrupting' the financial
industry with a slick UI or Android app. Financial companies have their value
in minimizing risk, not in the UI or frontend[1].

Actually transferring money is dead simple: I can sign a piece of paper(even
electronically) agreeing to pay someone $500 in the future. That paper carries
the same weight as money, but its value is reduced by the risk of default or
the hassle of going through the court system to collect. People who correctly
guess who will actually deliver on their word can make money by buying that
$500 at a discount(say $480). It's too easy to make a bunch of deals showing
$20 profits on the books that are really $480 losses that show up years after.

Financial companies will often play a big financial risk shell-game where
they'll take on a certain risk to make money, but defer other risks to a
different company in a big chain. ACH transfers and credit card merchant
accounts are two examples(a chain of banks taking risk transferring money, or
a chain of merchant->sales agent->bank->visa/mastercard for chargeback risk).
The only reason US mortgages are so cheap in the first place is because they
get immediately sold to a government-sponsored company.

My local bank actually has a lot of value because I've had an account with
them for 8 years: They can easily see I'm not a big risk to them, so they can
deal with me without worrying too much. They can give references to other
financial institutions.

It's too easy to get eaten by fraud as a tech company. The tech is really the
least important part of being in finance. The hard part is in trusting your
customers. The loan officer takes weeks to pore through documents because
these increase the banks' ability to trust you on the deal. They spend
hundreds of dollars contracting appraisal companies to physically inspect the
property again and again because it slightly reduces the chance of a bad deal.
If a tech company can do this cheaper, then they can sell this service
directly to the banks and make billions. Any data that you would collect on
your web app, the banks could probably demand documentation for as part of the
loan process.

[1] Okay, Paypal makes it easy for me to transfer money internationally, so
that's something of a UI issue with being able to interface with N countries'
different banks. But I bet their internal meetings talk about how to gather
enough information on merchants/people in Greece so as to minimize the risk of
default, rather than the technical issues of interfacing with Greek banks.

~~~
jackgavigan
_> I'd be terrified to entrust my money to a startup 'disrupting' the
financial industry with a slick UI or Android app. Financial companies have
their value in minimizing risk, not in the UI or frontend[1]._

There's no reason they can't do both, although many struggle to innovate
because of cultural and organizational issues.

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ilaksh
One of the interesting things about the 'Uberization of money' is it shows
another way that social organization can be high-tech. And integrating high
tech into society better allows us to benefit more from technology. Ultimately
this should mean society evolves along with technology much more quickly.
Which should provide more opportunities for testing high tech solutions to
societal problems like inequality and resource management.

Where I think this is going is towards better holistic accounting for society
that will eventually mean keeping more than one common point value (money) for
each entity. I think having a consistent system for tracking resources is
something that can enhance (rather than replace) the utility of universal
trade technologies like currency.

A big challenge is getting technocrats and moneytheists to synthesize their
ideas.

Systems like Ethereum, bitcoin, Resiliance seem relevant. I think we may be
able to get a common web assembly platform or something to help us evolve an
IoT/resource schema and module system. A common, deeply semantic and high tech
platform, integrated into social regulation and physical reality generally,
will allow society to take holistic measurements from various viewpoints and
quickly adapt to improved or diverse ideas for organization.

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chejazi
Lots of friction when it comes to financing just about anything nowadays. But
everyone has pockets so if you connect them via a platform, it becomes
possible to crowdsource anything: project financing, student loans, stock
ownership, etc. A less relevant but interesting point is that the future job
of a broker will be entirely automated.

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ousta
is 'uberization' the new 'big data'?

can't take seriously any article using this word in its title

