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Starting your own bank is laborious but profitable (2009) (wealthmanagement.com)
154 points by gscott on Aug 13, 2018 | hide | past | web | favorite | 155 comments

It feels like there's a growing split between what borrowers and depositors want from banks.

Conventional wisdom says small businesses benefit from a personal relationship with local bankers who know market conditions and can sign off on loans and lines of credit that a national bank might see as too risky or too small to deal with.

But as a depositor, I don't want a personal relationship with my bank at all. I want a reliable IT system with low costs and great tech support if something goes wrong, which is something the scale of a national operation can best deliver.

Things I value in a bank as a consumer. Loans that are serviced by a single entity for the life of the loan. Not ordering transactions in an attempt to drive the balance below zero in a day. Ease of ATM access. Customer service. I have all of these at the CU I use.

I don't keep large liquid in my CU, instead that is in higher yeild accounts, but that was true with Chase or BoA as well.

The reliable IT system has to be there, but you might be horrified about the beast of systems (human and computer) that make our banks/ach/transactions/etc function.

I don't worry much about loosing money in the bank due to FDIC/ NCUSIF. I can't audit their internal process so I instead depend on insurance. It kinda removes worry about their IT infra from my mind.

If you are above FDIC value, you should be banking with multiple banks and putting your money to better uses.

> It kinda removes worry about their IT infra from my mind.

For me, 'good IT infrastructure' isnt for reliability (though that's important!), but got good digital products. I want an iPhone app for my bank that's made my actual humans that know how to make apps.

In my eyes, the most successful banks have realised that there's actually very little differentiation between financial products between banks, and where you can set yourself apart is with your internet banking and mobile apps.

I use Monzo in the UK and really enjoy it.

There are some issues here. I also use monzo and would recommend them happily. however i used them to put business expenses on a single card, and each month grabbed the data and pushed it to a 3rd party. then they changed their statements (from memory "Amazon" become "amazon mktplace" - not just in future months but in past downloads. hence their past output depended on current config settings. (another issue was they changed how they represented a chargeback)

This would never happen with major banks - because they screwed the pooch with that in the 1980s and still have the same COBOL patches running today.

What I am trying to say is that the new banks will offer really good new products - but there is a risk premium.

"because they screwed the pooch with that in the 1980s and still have the same COBOL patches running today."


I've always wondered what rich people do when their savings/investments vastly exceed the FDIC/SIPC maximums of 250k per institution, because past a certain point, splitting among multiple banking institutions becomes logistically infeasible.

Do they tend to get some kind of private insurance against institutional failures for their entire balance? Or do they just not worry about it?

FDIC protects cash at (fractional reserve) banks. SIPC protects securities at (non-fractional reserve) brokerages. A very rich person isn't going to have enormous quantities in cash; most of it will be invested. But the risk of a brokerage losing your stock is way lower than a bank losing your cash deposits, and even that is very low. If they wanted to buy insurance against it that wouldn't be very expensive.

Plenty of places to put money outside a bank depending on liquidity/risk needs. Money market at the lower risk high liquidity end to high risk non-liquid of investing in private companies (Hello world). Managing these kinds of portfolios can be and is a full time job.

Depositor IT isn't too hard at all.

There isn't much of a gap between your average credit union and the best online banks. They all use one of a few COTS systems. Usually the only gap is that it is more difficult to setup inter-bank ACH.

I don't trust most national operations to actually have great tech support, though. The few that seem to have reasonably good remote customer service for when things inevitable break are the "online only" banks that exist entirely in that space.

"which is something the scale of a national operation can best deliver" I bet people from the field can chip in more but from what I know the systems at large banks are in horrendous state and are a crazy patchwork of legacy systems modern components and incompatible system from various merged/acquired entities.

As a startup I really like having a relationship with my bankers (pretty much always SVB -- tried a few others, without the love), including just as a depositor.

For my personal bank account though I agree -- just do the job at lowest cost. A cash management account works better for me even than a credit union.

Can't you get the loan from the local bank and deposit the money at the national so you can benefit from their infrastructure?

Yes, but that's the problem: then how does the local bank get money to lend out?

....from the Federal Reserve...?

In the context your banking system is in, this attitude makes perfect sense to me. But bigger picture, it is weird.

Note that this is an attitude where the banks are essentially assumed not to be at risk of bankruptcy. Maybe this means the depositor views the banks as a utility - access to the system whereby debts are settled and trade occurs.

This is completely at odds with what the banks actually do day-to-day, which is make judgments about which businesses and families have a chance to thrive. They execute this through their decisions on who to loan to, and how much.

There is an enormous tension here - the capitalist mechanism to encourage good performance of the banks day-to-day duties is losses and hence bankruptcy if they really muck up. A voting consumer who wants 'reliable IT' and 'Tech Support' isn't going to tolerate that in the design of the system.

I don't have any money in the American banking system, so I can be harsh. The world is full of threats and risk; if people can ignore what is been done with their money then the financial abstractions and safety nets are too extreme. It isn't reasonable for a depositor to be completely, purposefully ignorant of what is being done with their money. They should acknowledge and carry some (relatively small amount) of the risk, and have an actual relationship with their banker.

I miss the old-world personal relation with the banking manager that a reasonably wealthy individual could enjoy. I think it would create stronger local communities.

EDIT obviously depositors with account sizes in the <$10,000 sort of range should be able to ignore the whole financial thing, they don't really have enough money to be interesting. But serious amounts of money should feel some of the risk. Someone with, eg, a $50,000 bond should be able to ask probing questions.

An account with a retail bank is nothing more than the plumbing from employer to landlord, credit card issuer, etc. That plumbing may include a small reservoir to smooth short-term differences in flow rate, but most Americans don't even have that. The very best a bank can possibly do for you is to minimize annoyance and abstain from charging fees.

When your short-term/emergency needs are fulfilled and you want a relationship, risk exposure, critical thinking about the use your money is put to, etc. you invest with a broker. Some traditional banks have associated brokerages (Chase/JPM, BofA/Merrill) and some brokerages have minor retail banks (Fidelity, Schwab) but the best-in-class services generally come from different institutions.

For most practical purposes, banking and investment are completely different things. That may not have been true historically, but these days the concept of interest on a deposit account is a vestigial curiosity. If you want returns, you go to the stock market.

The word on the street in the credit union industry is that you need $500 million in assets to be long term viable. It could be lower for a bank, but you'd need a laser focused niche.

[edit] source: I sit on the board of a credit union. This is a concern driven by the regulatory burden and cost to maintain a competitive IT infrastructure

There is a company I spoke to while looking for a job during my garden leave that is trying to build a "web banking platform as a service"

You should check them out: https://www.narmitech.com/

I found them on the "Who's hiring page" here on HN and they seemed very on the ball (speaking as someone with lots of big bank tech operations experience).

Great find! Would love to find a similar company on the european market!

Also check out Griffin: https://griffin.sh

Now that's interesting.

I presume this is focused at retail banking? And focusses on the customer-facing system?

Looking at the api, it's seems very UK-focussed.

I had this as an idea a couple days ago, ha.

Check Out Solaris Bank. AFAIK they provide some someehat similar Services.

Thanks for this, very nice find!!

(ninja edit, found their pricing) Their pricing seems decent https://www.solarisbank.com/content/partner/preis-_und_leist...

You don't even need $500m to start a "real" bank.

The problem is that banking is a business for suckers. Banks only make money because, theoretically, they have low capital costs. But these days there are many, many entities flush with capital and eager to lend and they certainly don't care about actual cash flows or hard assets. In a world with 100B VC funds and SBICs and sovereign funds all desperate for any kind of real growth only suckers actually go to the bank for loans. And actually loaning real money to such people won't move the needle. This makes banking an inherently risky, and very boring commodity business. In the UK everybody's constantly asking why banks won't lend to anybody but real-estate developers and real-estate investors. What else are they supposed to do to pay their rent? Finance another kebab shop?

China, frankly, has done the right thing and fully embraced shadow banking. Having the economy held hostage by a bunch of golfers is insane. Extend the special privileges enjoyed by banks to a wide array of institutions and you will see capital find its way to the best allocators. This isn't about deregulating banks. This is about recognizing there are wide array of lenders out there who are ready to invest. Bring the shadow banks in from the cold.

US Banking makes ~175 Billion in profits per year.

There are few industries that even approach that.

Banking is the true oldest profession. It might be that the barriers-to-entry and minimum viable customer base are sufficient to keep out most ventures without serious subject matter expertise and deep pockets backing.

>banking is the oldest profession.

I hope you're not serious about that.

That's really more of a comment on market size than anything else, though. Everytime money moves it's an opportunity to profit.

The Big Six made most of that money and they don't do much actual traditional banking these days. The other 6500 US banks are hardly raking it in.

> and cost to maintain a competitive IT infrastructure

I would actually counter this with the point that many of the historic banks are so steeped in technical debt that newcomers are at massive advantage in terms of iteration speed and IT cost. This comes from a lack of competition (until very recently), and cultural problems at the executive level that stop them from considering themselves technology oriented firms.

Look at Monzo in the UK, recently given full banking license, been on the scene for 3 years now.

No bank in the UK has been able to come close on ease of use/access, onboarding speed, settlement speed, customer service, clarity and feature set of their current account. From the outside, it looks like they aren't even trying...

Has there been any talk of credit unions pooling resources on some of the IT stuff? Everyone expects a mobile app nowadays, but it doesn't make much economic sense for every single credit union to build their own.

There is an active market for vendor software, as indicated by the other replies. The real expense driver isn't necessarily that "you need an app" but that "you need an app that is either very hardened or safely quarantined from your core infrastructure". And more generally, yeah the front-end stuff is kinda crappy, but it's because the back-end has to connect to a bunch of different systems with weird proprietary protocols and it has to work 100%. Every. single. penny.

And if you're a $100-$200 million in assets credit union, you may have an IT team of 2-3 people (that's a swag, but it wouldn't be > 5)

The company I work for develops software, including mobile apps, for smaller banks and credit unions that can't afford their own development team. We have more than a thousand clients and all of their apps are basically built on the same codebase with small branding customisations (colours, images etc). Company is called Fiserv, if anyone is interested.

A lot of credit unions use Symitar Episys and there are vendors which sell apps and websites for the platform.

Look into CUSOs. There are players that cater to that niche.

Two separate Canadian credit unions I use have the exact same app layout, (island savings, vancity) so I imagine that's already happening to some extent.

What if you don’t raise money from ordinary depositors?

I really liked the Beal Bank model when I read about it, they raised from CDs, money market funds, etc which had a low funding cost but not much IT needs. The guy who started it is worth 10B+ now

I think you may have it backwards. CDs and money market funds are actually liabilities for the financial institution. They're ways of paying customers more in the hopes of attracting deposits.

There are non-depository financial institutions, but you'd be more familiar with them by other names: investment banks, insurance companies, pension funds, mutual funds

Yes, they're liabilities just like deposits. But if you offer them and not regular deposits (like the bank I mentioned) you don't need to built out a whole infrastructure for payments, checks, etc, just for the much more limited set of actions you need to support those.

Maybe a little off topic, but I'm curious, how did you get on the board?

There is a vote every year and I looked at the candidates and thought "wait a minute! these are just normal people like me!" so the next year I ran.

I highly recommend it. Most CU boards are in desperate need of younger members (younger here being <50), you learn a TON about governance vs management vs doing the work, and it looks good on a resume too

Is there added risk for a credit union to be in a specific niche? Say, for tech workers.

I'd guess that being in a niche brings you a better understanding of the environment but the downside is that if that niche tanks, you're toast.

Credit unions (or their closest form) in Europe, (co-op banks and various incarnations such as Sparkasses or Caisses d'Epargne) are now spreading their risks, and to alleviate the geographical niche issue merged together (several dozens Caisses d'Epargne in France 15 years ago, about ten now for instance).

Other forms of pseudo co-op banks such as Credit Agricole (which started as a network of farmers credit unions) or Caja Rural are now banking behemoths doing everything from retail banking to investment, HFT: Credit Agricole is now probably in the top 10 largest banks worldwide.

Credit Agricole recently entered the top 10, as per their own PR:


This is incredibly sad.

I've used CA in France and it was a very miserable experience, even by French banking standards (which on themselves are surprisingly low).

I'm using them in Egypt and it's a shitty experience too. Better than French CA, better than most government-owned banks in Egypt, but still shitty.

I've heard many horror stories about CA personal banking in France (bank transfer taking ages, random charges appearing/disappearing etc).

Their offer towards startups "Le Village By CA" seems, however, interesting.

Perhaps, but serving a specific niche is exactly the origin and general mission of credit unions in the US. Most CUs now try to have as broad a membership as possible but this is a recent trend.

When I mentioned a laser focused niche, I meant that by being niche focused (like Venmo or Paypal) you can avoid a lot of the overhead needed for having a wider selection of banking services. The common example here is no physical locations, no tellers, less overhead. But it also applies that if you don't do mortgage lending you don't need mortgage specialists and you have less interest rate risk to manage

[edit] re: ldayley comment, I'm referring to vertical niches of service rather than horizontal market niches

If I had $500M the least fun thing I could do is start a bank.

You can open a bank, and then this might happen to you:


https://en.wikipedia.org/wiki/Abacus:_Small_Enough_to_Jail (an excellent documentary)

That's messed up. Injustice, and maybe racist? So many other Banks down the street that casued malice...I thought it was bad enough that non of the big banks got in trouble for ruining the global economy...but to prosecute a small bank, which has default rate of 1/10th of other banks is infuriating, which fired the one employee that casued trouble...

Though they were cleared of all charges, I'e the stress caused onto the staff of 19 people was great.

The only reason they brought the charges on "low hanging fruit" was to be able to point at why it is basically impossible to prove crimes against an individual or corporation in nuanced financial matters to a jury.

The point was to show how this is a negligent use of public resources unless the laws changed, which they won't.

Maybe it backfired because the jury felt it was unfair by that point, the result is still the same and it solidifies the case law itself raising the bar for prosecution even higher.

Since this article is 9 years old, I was curious about follow-up. Checked LinkedIn and looks like this guy is still with the firm he was with in 2009:


So I guess you...can't open a bank?

In fairness to him, the OCC (the national banking regulator in the US) has had a practical moratorium on new national bank licenses for most of the past 10 years. You can get a new state bank charter, but not a national one. I can't blame him for not wanting to start a bank in the US lately.

I was mostly being snarky -- totally agree: starting a bank is insanely complex & difficult, and it's not getting any easier. Kudos for even trying. No blame from here either.

Can you expand on why one wouldn't want to start with a state bank?

The problem is not the start with a state license, but expanding to a federal license.

I'll join you if anyone is starting a bank.

We are working on a new bank and raised a $6m seed round.

My email on my HN profile if you are interested in learning more.

I can't tell if this comment is in jest or not, but we actually are starting a bank in the UK to be a platform bank for fintechs across Europe and beyond. Happy to chat.

He's real

Me too

Same here.

Count me in

okay, let's start one. we just need to find a few hundred million.

any takers?

count me in!

I think its interesting to see fintechs trying to bypass the traditional banking model entirely. They are trying to move up the chain with a UX advantage while larger players are trying to defend themselves. Square and Venmo both offer debit cards which covers the majority of banking needs for an average person.

We've actually started a new bank explicitly to provide the banking infrastructure to companies like this that are good at owning the UX advantage. Our conviction is that in the long term banks will be disintermediated from most of their customers and there will be a general unbundling of banking services - you won't get your mortgage / small business loan / checking account all at the same bank.

Heads up your beta signup form is broken

Broken how? I got a bunch of signup pings off this thread - Bug report welcome founders@griffin.sh

On submission of my email it redirected me to an error page. Can't remember what it said, only that it was an unstyled html page with one line of error text. Just tried again and works now.

Who is "we"? Please, tell us more.

More details in profile - https://griffin.sh

i'd start a bank with the following principles:

0. don't tell the customers that we can do anything we can't do

1. cap profits at a low percentage of the capital base to discourage being irresponsible with customer money; enforce corporate austerity to keep costs very low

2. any profits over the cap are returned to customers

that's it, i think. the idea is to have a bank that is rock solid (even when compared to other banks) and profitable for customers. maybe only offer one type of account, and have no minimum deposit. no fees, and offer ATM cost refunds. no personal loans. no credit cards. maybe offer a mortgage package, but probably not. no branches, obviously. customer service would be top priority.

the corporate side of the bank would ride on austerity. no advertising beyond what is necessary to start the bank in motion. no luxuries for the c-suite. maybe enforce a max disparity in pay between the lowest rung and highest rung of employees to something outrageously constrained like 10 or 20k. maybe only have five or six job titles in total, if possible. fill those jobs on a first (somewhat qualified) come first serve basis and a 20 minute interview. advertise the jobs only as necessary.

is this idea crazy? maybe in the banking sector it might be, but you can't trust them. they're drunk on chasing money, and they're reliably unreliable in the long term-- the article even mentions how many banks have gone under.

but there are a lot of great examples of other kinds of companies (i am specifically thinking of the food wholesaler called aldi) which make their money by offering what the customer needs and nothing more. you don't need to go crazy profiteering to make robust profits...

No Fees, No Loans, No Credit Cards - how exactly does this bank make any money?

You do realize all those things COST banks money in the past right?

some 30+ years ago, when banks were on COBOL mostly, the system analysts would try to lower costs because you couldn't charge a fee, and if you didn't provide services that cost the bank money, the clients would move to your competition.

In that time, banks had the concept of Client Acquisition Cost. Today banks uses fee for everything and everyone is ok with that, so they now have the concept of Recurring Fee Profit Per Customer. If you don't pay many fees, they treat you like garbage.

So yes, it is very possible to make a profit by not only having those things but having that without fees. You will just have a harder time getting institutional investors because now they will only ever invest in predatory banks because they provide a return much faster.

> Today banks uses fee for everything and everyone is ok with that

They actually don't. Most ATM fees and inter-bank payments (at least in the UK / Europe) are swallowed by the banks rather than exposed to customers.

> So yes, it is very possible to make a profit by not only having those things but having that without fees.

How? As far as I can tell you're describing a bank that runs deposit accounts but doesn't loan the money back - that is not obviously a profitable enterprise. Something in the whole scheme has to make some money to pay for the employees, the infrastructure, and all the other fixed costs.

AH, Europe. In the US you pay around $1.5 to $4 per withdraw, because the ATM network is a private enterprise not owned by the banks.

You will get there, unfortunately.

And you completely missed the point. Loaning/re-investing with volume is a very sure way to make money, and was what banks used 30+ years ago. now they pad it with fees for everything.

The ATM network here is also not owned by the banks (similarly FASTER payments, they are members of the scheme but there's a third-party that administers the network). They pay for access, but don't pass that cost on.

And I did not miss that point, thank you. I just disagree with it. I don't think banks make their primary income from fees; current accounts are still basically a loss leader.

maybe by buying inflation indexed bonds on a rolling basis. nab something like 1-2% interest on the customers' money in an extremely safe investment vehicle, then return most of that to the customer after paying off infrastructure costs. (does this work? i have no idea whatsoever)

> maybe enforce a max disparity in pay between the lowest rung and highest rung of employees to something outrageously constrained like 10 or 20k

A simple multiplier makes more sense. Top position shouldn't be making more than 10x the bottom position (or something like that). A janitor, for instance if full-time and more than just sweeping floors, is making $20-40k/year (big spread, but that's starting at $10/hour and going up to $20/hour which is a reasonable rate in much of the country for that work). So that means top brass is making $200k-400k (on a 10x multiplier between top/bottom incomes). If the big boss wants a pay raise, they have to move at least the bottom of the pay range up with them. If you add a constraint on the mean/median income, they have to bring everyone up with them.

i see where you're coming from.

i think using that framework the ideal constraint would be something like 1.2X or maybe at the very most 1.5X. this leads to overpaid janitors and underpaid execs, which is the desired result of the policy. it sucks having to find a new janitor because things get dirty in the meantime, but there are a billion execs out there and most of them should be doing very little other than keeping the ship stable most of the time.

holding people's money safely is not an occupation for people who can afford to treat money carelessly in their personal lives.

i know that these are "stupid" and petty things, but i think little petty things like this add up into a corporate culture if you have enough of them. the corporate culture of this hypothetical bank would do a lot to add to its branding and also its credibility.

honestly i wouldn't even be proposing extreme measures like these (or advocating that the execs should be doing very little) if i didn't think it was necessary for the concept, which i've now put far too much effort into :p

Cheaper to either embezzle of buy one of those floor cleaning zambonies, lay off one of the janitors, give the rest a raise and expect them to get done in the same time.

There are other perks an executive could ask for that are harder to track as total compensation.

> that's it, i think. the idea is to have a bank that is rock solid (even when compared to other banks) and profitable for customers. maybe only offer one type of account, and have no minimum deposit. no fees, and offer ATM cost refunds. no personal loans. no credit cards. maybe offer a mortgage package, but probably not. no branches, obviously. customer service would be top priority.

You're basically describing Fidelity to some degree. Their . cash management product basically has all of those features. They do offer a credit card, but word is they lose money on it to capture brokerage business.

The issue is all of that is subsidized by brokerage clients, where the fee structure is still reasonable depending on what you're doing, but still mixes retail and investment banking, which I take as an implied no-no in this thread?

Given those parameters, how would your bank turn any profit at all?

Monzo started the first new bank in the UK for a while. It appeared laborious and they are losing £30m/year but I think they will be profitable.

There was a prominent builder in India called DS Kulkarni. He just tried doing that. Collected almost 1250 crore INR from almost 2000 investors as FD’s promising returns. Then demonization was implemented in late 2016 and all his investors were duped by him.

Now, both he and his wife is in prison.

You legally need something like $10 Million in reserve capital to start a bank. Pretty much any business is profitable if you can afford to start with 10 million in savings plus have enough money to run the business.

> Pretty much any business is profitable if you can afford to start with 10 million in savings plus have enough money to run the business.

This is non-obvious to me. Care to elaborate?

I think the idea is that there aren't any problems in business that cash in the bank can't solve. It's just a question of whether you have enough money to throw at the problem to make it go away. $10 million is enough to make any problem go away. Basically you just hire a consultant and they get it done.

Finance is high wizardry, treating literally every single problem you have in dollar terms, but it built the modern world. Us software developers exist in what's basically the frontier of business. $10 million is just getting started for a software company. But it's enough to push through to profitability in every single other sector.

Bullshit. Hire a bunch of consultants without any ability to judge which are worth the ticket, and you’ll spend a measly $10 mil in no time.

Knowing which consultants to hire and when is presumably the domain of the finance guys. You can buy competence, it's just expensive. $10 million is enough to hire a full turnaround team.

The key is you have to have it as cash in the bank. You can't finance a turnaround, the better move at that point from a financial perspective is to just fold up the business, but if you have it, you can use it as collateral for a more aggressive expansion.

That way if you run into enough problems, the money guys can 'foreclose' and use the reserve capital to enact a turnaround plan, and eventually earn their money back. It's an extra form of security.

lol, how do you hire the right finance guys? You didn’t address the central paradox.

The finance guys are running the company at that point, so presumably they already have that knowledge. And most companies do retain a finance guy in a senior management role as the CFO. So their perspective gets heard and in some cases actually listened to. It's just that running a company purely with safety in mind generates far less profits than aggressive investment in a business model.

If a finance company is running a business, it's because the industry people that started the company managed to run it into the ground, finance people never seek to start businesses in any other space than the finance space. It's just not interesting to them. When they wind up running companies, they mostly just delegate all the decisions to the consultants they have a working relationship with.

It's simple, you go to a lender who demands you keep $10MM in the bank as a contingency fund. You run the company into the ground, and the lender has to foreclose on the loan, taking control of the business. They then use the $10MM to turn the company around, eventually recouping their investment over the long run.

You're bringing the $10MM in collateral, not the bank, so the bank doesn't have to use their own money for the turnaround. It's a hedge against risk, not some kind of magic bullet like you seem to think. No paradox needs be invoked, the finance company simply runs the company differently than you would, from a purely financial perspective.

Even if I grant you that $10 million is reasonably close to being able to "get rid of any problem", that doesn't seem to imply profitability of the company.

Perhaps solving the problems costs $4 million and the revenue is only $3 million.

That's why the money has to be cash in the bank, fully liquid. You can't convince anybody that their money would be better spent on your business if the numbers are like you say, but if the capital is in reserve then nobody has to.

Lithuania has a special banking license for "fintech" with only 1.5M EUR regulatory capital requirement.

It's dropped to around $3m in Australia with some limitations. $10m I believe for the full license.

Maybe Stripe will surprise us with a product that makes this easy to do.

Certainly possible now that the OCC has opened the door to a "fintech banking charter". In the past I'd have said this was impossible as Stripe has little interest in finding itself regulated as a bank or in becoming a bank holding company.

The lack of the ability to take deposits kills the FinTech Charter DOA

Ah I hadn’t heard that. If that’s the case then I agree 100%

When most people were busy with startups in the early 2000's I knew a group of people who started a bank. Boring as it gets, lots of red tape, but once it got going it was profitable.

Fundamentally, banks are scale businesses (much like most technology companies). Expensive to start, but once you've got the product / regulatory infrastructure in place your marginal revenue is really low-cost.

It seems there is a huge opportunity for someone to “disrupt” our banking system beyond saving fractional dollars and cheap trading. A simple, online only (or mostly, like Schwab) credit union could find a big audience.

It could be marketed as low fee, community-centered banking. Offer no ATM fees and low mortgage rates without the typical profit motive.

There already are such. One example is Alliant Credit Union, which is where my main US account lives.

Wow, this is right in my town and I had no idea! Kind of re-enforces my point as I am their prime market and not familiar with them at all. On second glance, it looks like I don't qualify, which is probably a barrier for larger market share.

Anyone can join them - like many credit unions these days, they've hacked the statutory rules restricting credit union membership, and one of the ways to join them is to allow them to pay $5 to a charity once on your behalf:


I'm not sure about who their primary market is now, though - they grew out of United Airlines as their primary employer group, and now have many others (I joined through Google). I think they're among the largest credit unions in the US.

Regardless of the primary market question, they meet the needs you outlined.

There are some banks doing this as well. Check out Radius bank for example - online only and unlimited ATM fee rebates

I got interested in this after reading about Andrew Beal. He opened one with around $10 million decades ago and now has a net worth over 10 billion. It’s a super cheap source of funding if you have a good use for funding.

Seeing as this comes up every so often, what in your opinion are the elements missing in todays current banking system - either as a consumer or a developer - that you would like to see?

I used to pay my very old landlord with personal checks for a chase account. At some point somebody, (I suspect the part time janitor) got my account number and tried to commit check fraud nearby. This was unsophisticated, an inkjet printer sort of attempt, but nevertheless forced me to close the account, get new numbers, and update all of my direct deposit and bill pay settings on other accounts. It cost me many hours and at least one late fee.

So the obvious feature I would like from a regular, boring checking account is one-time random numbers for everything. Every check should have a unique, completely opaque number. Every time anyone wants an account number for direct deposit, wire transfer, bill pay, or anything else, I should be able to instantly generate a new, disposable number that works until I chose to retire it.

I'll bite :)

* Quick and customizable bill pay for onetime or recurring payments * Integration with peer-to-peer transfer systems (Zelle, Venmo, Paypal, etc.) * Simple budgeting tools and analytics. Doesn't have to be mint, just have something. * No ATM fees * Easy and fast transfers to other banking institutions * API to allow for devs and other apps to integrate basic functions * Good customer service - let me talk to a real person * All the functionality available from an app. Don't make me log into a desktop browser to access certain features. * Clear descriptions of different types of accounts * Credit reporting

That's all I can think of right now but there are probably a ton of other issues we hit daily that could be solved. Though I have no idea of the regulatory hurdles of implementing these and other solutions.

Interesting how a lot of these problems don't seem to exist in Europe. (I lived in Scotland, then moved to Finland. Of course I appreciate "Europe" is full of diverse companies, regulations, and facilities. Still I think it would be wierd to find people in Europe paying rent by mailing physical checks, etc.)

Specifically "ATM Fees" are something I've never had to deal with, fast transfers were the norm, simple analytics were common-place. (Things like pie-charts showing where your money had been spent from your "checking account".)

The only thing that has always been missing from companies I've used has been easy-to-automate-exports of data. You could login and export manually to CSV, etc, but you couldn't easily script that. That seems to be changing at the moment, and EU-wide there are provisions being made for exporting and API-usage (though I suspect it'll all be terrible.)

The Nordea bank I use in Finland has a very nice little mobile app for showing my my accounts, mortgages, and investments. It also lets me schedule appointments, or call customer-support.

Customer service is hard though; much like delivery companies there are only so many banks to choose from. Name any name and ten people will say "Worst. Bank. Ever". I've used maybe five banks in my life-time, and none were terrible, even if some were better than average.

> "ATM Fees" are something I've never had to deal with

Really? There are lots of little independent ATMs around the UK that charge a fee, and if you use a UK card abroad, there's a fee. They're not huge, but they're not zero.

When I was in the UK I used the link network, and to the best of my knowledge never paid a fee to withdraw money.

You're right about using UK-cards abroad, which I guess I'd forgotten about, though!

Only the little grey ‘liquor store ATMs’. Most ATMs are run by banks, and it doesn’t matter which bank owns the ATM, you can get cash without a fee.

Right. I avoid the corner shop ATMs when i can, but i can't always, because there aren't proper cash machines everywhere. I'd be surprised if someone else had a different experience.

Regarding APIs: Let us use access keys that limit what the API can see/do. I don't like that Mint can do almost anything to my account by virtue of having a password. I just want to be able to reliably collect transaction and/or balance information, nothing more (which is already a lot, but I manually or semi-automatically collect this at the moment rather than using an API).

Let the user generate an API key that is (somehow) transmitted to the application with limited access. Then the user, at the bank's site, can revoke these authentications at any time. Stopped using YNAB? Revoke its key. Stopped using Mint? Revoke its key. Started using gnucash? Add a key.

I was just thinking this exact thing. It's reckless to provide a third party your direct banking credentials. I feel unsafe entering those credentials into my browser as it is - but to share it with a third party product gives me the creeps. It's so stupidly easy to generate an access token that can be shared with third parties and restrict access to read-only. Why they didn't think of that is beyond me; the tech has been available for a very long time.

Want to know something really annoying? I bank with multiple banks. One institution uses access tokens. I can link them to my primary bank (the primary has a better "whole picture" view). But does my primary bank offer access tokens of their own? No. They understand the concept, but don't use it themselves.

Of course, I know why. Different teams. There's no cohesive vision to their IT work, same as every other enterprise out there.

EDIT: Cleaned up language. Removed some info I didn't really want here but really botched the posted version when I did.

In Europe, PSD2 and the Open Banking initiatives provide this. All retail and commercial banks are required to provide open APIs to Account Information Service Providers or Payment Initiation Service Providers (the former being read-only, the latter read and write). Essentially you're talking about a delegated access / OAuth-style universe for banks and technology companies. It'd be great to see the US adopt something similar.

> API to allow for devs and other apps to integrate basic functions

If the API is sufficiently standardized, that could turn banks into commodities: let third-party software figure out the best bank to store your money at any given time, and do all the accounting for you; no need to actually deal with any specific bank manually.

I've been looking at Simple.com as it seems to check off some of those features.

If anyone has any feedback about their service, I'd love to hear about it. From what I understand they don't support checks; only debit cards. But that allows them to not charge any fees since all the transactions happen online.

Ok (for checking) interest rates. Haven't used them for billing yet (I don't think they do proper e-billing, instead they'll send a check for you). I won't say 0 fees. They have fees (like most banks) if you use the card outside the US, but that's why I have my two travel credit cards (AMEX and Visa because not everyone accepts the former, but it gives me the best rewards).

The budgeting is neat, though they added a new "expense" budgeting thing that I haven't quite figured out yet. Previously they had "goals" which you'd set up one at a time, burn through. Like "August Lunch Money" with $200 in the account by 31 August (give me a little to spend each day, not all at once). Now you can make a "Lunch Money" expense that'll get replenished each month, but it's only been around for a couple weeks and I think I set it up wrong.

They still have goals, which are effectively digital envelopes. But if you use other budgeting tools it's somewhat redundant.

Deposits happen quickly, typically within 24 hours of sending the money from my primary checking account (I set up Simple to try and bring some more financial discipline to my life, not to be my sole account).

They don't offer any better API access than anyone else. The joint accounts are neat (3 accounts, one for each person and one shared). But only works for US citizens, my fiancee will have her green card but not qualify until they change that policy or she becomes a citizen (late next decade). Instant transfers between other Simple account holders, which is nice if you have other people you know who use it but the same is true for most banks (near instant intrabank transfers).

Responsive customer service. I've had maybe 3 or 4 issues or questions over the years, and I've always gotten a response (conducted over email) within 24 hours, probably faster but I only check my home email a couple times a day.

FWIW, Bank of America is partnered with Zelle. This is how I pay my rent each month.

Zelle is one of those things that is great but I apparently live in the corner case of everything...

For instance, I have accounts at three different credit unions but I only have one mobile phone number (and Zelle insists on having that phone number). So far as I can tell, I can't register with Zelle at all three credit unions, only one. And leaving the first and signing up at the second requires manual intervention.

Also, I apparently can't use Zelle to transfer money to myself. (This seems to be a limitation of all person-to-person systems, where I can't be the owner of the source and destination accounts.) So, right now, the fastest way for me to move money between two credit union accounts is to go stand at an ATM, withdraw cash with one card, and deposit it with another.

A quality mobile app. So many smaller banks/credit unions have terrible desktop websites, and I guarantee that the mobile experience is just as bad, if not worse.

Also sane password requirements. Every single bank I've ever created an account with has had asinine password requirements: 8-12 characters, no special characters, at least one lowercase/capital/number, etc.

A notable exception, imho: AlaskaUSA FCU. Their iOS app is fantastic.

I've been able to continue banking with them, even though I've been 3-4 timezones away for the last 5 years, exclusively through their app.

- Login with (username/email, password, U2F)

- mobile app check deposit

I like many of rgersten's features too: https://news.ycombinator.com/item?id=17752320

First, the return of the wall between the gambling (investing) side and traditional side Ala glass steagal. Second, enforcement of higher fractional reserve requirements (last I heard it's not even 10 percent anymore). Third, and most controversial, is a return of money making powers back to Congress and away from the unconstitutional Aldrich bill in disguise. Fourth, a reduction in abusing the imf to financially hold countries hostage for their wealth.

Fifth, bankers in jail that have broken the law, and revocation of charter for repeat egregious offenders.

Cryptocurrency support would be nice. I understand why that's not going to happen, but if a local bank supported crypto, I might be tempted to open an account.

I've often heard that problems with banks and private , centralized control of wealth is one of the fundamental reasons for cryptocurrency.

I'm genuinely curious, what cryptocurrency related services would you want a bank to provide? And, related, what do you expect or hope to be using that cryptocurrency for?

It would be nice if I could buy cryptocurrency with my account funds, and for it to be protected/insured while it was in the bank's wallet. The ability to transfer in and out, etc. The ability to make debits against a cryptocurrency balance, etc.

I use robinhood at the moment. If robinhood was able to act more like a bank, and supported transferring cryptocurrency in and out, then it would basically be what I was looking for.

In the past I've just used coinbase/poloniex, and I just transfer to my wallets. I currently use bitcoin to buy domains on namecheap, and I use purse.io to buy stuff from amazon - but I can see myself using it for a lot more in the future.

There may not be a lot of demand for it, but like I said, if local banks started offering these services it would get my attention.

It sounds like all the same protections and uses you get with USD. I get the impression Coinbase may be moving in that direction if they haven't already.

What advantages over USD are there for using bitcoin to buy domains or items from amazon?

Not sure if there's any specific advantages, but I still prefer to use bitcoin when I can - just feels good. It's nice to be able to buy stuff from amazon without an amazon account though, although that has more to do with purse.io than bitcoin.

In Europe, Revolut do support crypto

I guess N26 already does it or will soon as they and Revolut copy each other on features as fast as possible (to such minute details as the card design itself)

As far as I know, revolut does not offer full support for cryptocurrencies. When you buy a cryptocurrency from revolut, you get an IOU. In other words, you can use revolut to invest in a cryptocurrency, but you can not actually use the cryptocurrency you have in your wallet to buy something.

Also, the exchange rate is a tiny bit worse than the major exchanges. The real service revolut offers here is an incredibly easy way to invest in cryptocurrencies, for people who do not want to deal with the friction of getting real cryptos.

I'm signing up for Revolut - they're offering a beta program in the United States, looks interesting.

IIRC, a guy at a hackerspace bought a charter from a failing/ed local bank to complete some transaction that would otherwise been impossible/ridiculously expensive.

Some companies (not just car financing) did this i. The past as a cost savings feature.

Think big retail stores or insurance companies with high cash flow coming every month through the bank.

Bobby Axelrod paid wags pretty well.

>The events that literally shook the foundations of the financial system

Was there an earthquake at the NYSE?

While some uses are certainly a misunderstanding of one definition, the historical uses and accepted definitions are far broader than many people realize: https://www.merriam-webster.com/words-at-play/misuse-of-lite...

The gist:

> The use of literally in a fashion that is hyperbolic or metaphoric is not new—evidence of this use dates back to 1769. Its inclusion in a dictionary isn't new either; the entry for literally in our 1909 unabridged dictionary states that the word is “often used hyperbolically; as, he literally flew.” We (and all the other “craven dictionary editors”) have included this definition for a very simple reason: a lot of people use it this way, and our entries are based on evidence of use. Furthermore, the fact that so many people are writing angry letters serves as a sort of secondhand evidence, as they would hardly be complaining about this usage if it had not become common.

It seems that the word literally is literally never used in its literal sense.

Literally has never really been used in the actual definition. Writers have used to it show how important and foundational some event was. Or just to create some excitement in the readers.

Well, the NYSE is only the foundation of the financial system in a figurative sense.

Give this podcast [0] a listen, the meaning of words evolve over time. much of comman talk in the 1600's would not be very well understood today simply because the actual meaning of words has changed.

[0] http://www.econtalk.org/john-mcwhorter-on-the-evolution-of-l...

Obligatory XKCD:


Just imagine if that labor went to something that created wealth instead of leeched it.

Yes, it is quite hard but may make lots of bucks with the proper plan.

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