My warning is this: Be careful what you wish for. If we were to switch to a full digital currency, there are significant concerns that money could be allocated like a voucher, where it could be sent and only spent in a certain way. Suddenly the government decides those receiving some kind of social care allowance must spend different parts in different ways, i.e. a minimum of 50% MUST be spent on rent (an extremely enticing proposition in a recession). Perhaps there is a tax for not spending enough, or on the correct thing. Perhaps there is a micro-tax for moving it around. Maybe the micro-tax is dependant on your social credit score. The slippery slope goes on.
The only thing currently stopping this is that you can withdraw your entire wage each month and spend it however you want, without such a tax. The government or banks cannot be certain of precisely how you spend your money when using cash. The very moment cash is gone, such implements can be created and there is nothing you can do about it.
Maybe I am behind the times, but I don't like the sound of "disruption" in the banking industry. That last time I saw "disruption" was in 2008, and many people lost their homes.
The real mechanics you'd see in your example is that the business elite would begin astroturfing support from the American public, with some nonsense about helping the poor better control their finances. Nobody would believe it, and progressives would be against it. In reality it will be driven by the commercial desire to FORCE people to purchase coca cola or whatever.
SNAP, colloquially foodstamps, can only be used on certain forms of food. Frozen goods are fine, but cannot be prepared hot, even if there is not a charge or it is the exact same food product.
So my local corner grocery is allowed to sell anyone frozen food, whether they pay with SNAP or cash. But they also have a microwave that anyone can use to heat up purchased food, except for SNAP buyers. It is interpreted as unlawful for a SNAP recipient to use that microwave to heat up their subsidized food at the place that they bought it, so there is a government policy, enforced at the point of sale, severely restricting the use of SNAP.
I found that the provision in question. The part of the bill defining "food" as "any food except hot food" was actually from the rewriting in 1977, where it was added to (and this comes from a single second hand source) supposedly ensure fair competition with fast-food joints that can't accept foodstamps. To me, nothing indicates that the intention of the government officials was to restrict the choices of recipients, but rather to ensure fair competition. One member, along with a few (maybe two) supporters even bring up the idea of restricting choice based on "nutritional value", but the others tear it down calling it wrongheaded and administratively impossible (my words).
This is interesting because what we don't see is a majority of the house that is OK with restricting choice for the subjects own good, or for some notion of health. Instead we actually see members very hostile to the idea of restricting choice based on "health". The path for such members to accept a restriction anyway is by putting it against something they value more, the fair competition of the free market.
The people who are restricted by the "hot food" limitation is not the recipients of snap, it is the store owners, who are supposed to be banned from competing with KFC.
"The Democrats would never do that" then Republicans pass the bill, and the Democrats protest, but run with it and don't abolish it when back in power… Swap parties as required for your flavour of government.
The United States Congress, and the executive branch, they never do anything, to the point where you find it absurd to suggest that they would? Everything is done by the ”business elite”?
My point is that "The Government" is not a singular hivemind, and can't be meaningfully analyzed as such. There are people, those people operate as part of The Government, but any analysis cannot be separated from the person or their affiliations.
Saying "The Government did X" only leads to the misunderstanding that "X" wouldn't have happened without The Government. In reality, "The Government" was the hammer that person "A" used to do "X". Had he not had that hammer, he could have used another.
Right now you need someone in the government administration + a court + a bank to do anything like this. With a digital dollar, you lose the last two.
I get strange looks from folks now since I try to use cash whenever possible to do so.
If I’m the only one taking the effort to do this, everyone will eventually lose this option. It’s incredibly frustrating to watch people actively work to not understand this point.
All so they can make 2% in credit card points, pretend they are at some materially increased risk of crime, and the convenience argument. None of which are very compelling compared to “a third party now mediates what spending you are allowed to partake in”. Works until it doesn’t.
Rationing everything might seem like a terrible idea right now but the good times might end any moment.
There is also the some what sinister angle where adding new game mechanics to an old rather boring game could make gameplay more interesting.
Favoring a flat playing field would require we ignore how much money some people really have. (and how they got it)
For some reason it is normal for vouchers to expire. We might want you to buy vegetables but if you chose not to you don't have to. There is no need for anyone to grow vegetable rich.
Not really. It would be similar to tax rules—not really applicable to non-American depositors.
Look at WIC for example, even in progressive California, they literally force you to buy only white eggs: https://docs.wic.ca.gov/Content/Documents/ShoppingGuide-EN-A... . You also can’t buy any cheese with taste, because you are poor and you don’t deserve good food.
Think of the cost of that stupid bureaucracy.
With both having happened over time.
They also at least somewhat try to compete with Paypal on online payment on EU specific shops (not they they have much success, not just because of network effect but because a combination of their products being sub-par and them realizing that various other even less competitive/ux friendly competitors would make them more money if anyone would just be using it..., so they are in the process to "get innovated" again by forcing impl. of certain ideas related to person-to-person money transfer which have proven to work/being useful in a few countries where they/their banks did adapt them years ago.)
Paypal is needed in USA due to archaic systems. In Europe many banks allow instant transactions without the risk of blocking your money for 180 days - what paypal seems to do
And yes it is thanks to a byzantine system of history, regulations and very few Americans travelling abroad to experience radically better systems.
Crypto is the last offshore banking for the middle class. It essentially took over right when FATF eliminated banking privacy and bearer shares -- which IMO is no mere coincidence.
The incoming market volatility will likely have winners and losers... but historically it was mostly losers (>6.4 million families and counting.) =3
> worker 401k vulnerability to dubious ETFs
A fintech with 1M users screwing up loan rate timings being unable to finance savings accounts and facing a run, would not have much runway and the government would simply slowly try to make people get 50c on the dollar and tell them to go back to a big bank if they want better...
Any financial institution that makes the act of investing money simple and legible will win some market share. I have some savings accounts in RBC Canada, and the UX seems to be designed by monkeys throwing around crayons.
It is indeed quite interesting that its innovation and competitive pricing (https://news.ycombinator.com/item?id=42838063) in the last couple years has happened under old, established Power Corp.
Any educating theories about why this is happening now?
But I think the point still stands. WealthSimple is probably not perceived by the median customer as a traditional bank. So people using it is a counter-example to GGP's point that people won't use "startup" banks.
The account management interfaces of Canadian banks are pretty universally terrible. Even the neo-banks like Tangerine.
Security is a clown show at Tangerine, I no longer use it and can't suggest other folks do.
Most if not all the big banks have a high yield savings account or an equivalent under different names.
And yes, it's just a savings account with an actually noteworthy interest rate. It's usually a bit below the interest rate of money market funds.
Disrupting a heavily regulated market is usually called ‘racketeering’ or ‘organized crime’.
I use Fi[1] - it is a service layer on top of an existing savings account from a traditional bank, which offers things like automatic budget/expense tracking with UPI (standardized cashfree payments platform that everybody uses), quick access to debt and equity funds, credit-profiling and networth-tracking, rewards etc. It's pretty good for now at least: https://fi.money/
As a random example, I had $3,600 stolen from one of my accounts by transactions labelled "Microsoft Online Services" or something like that. The bank reversed most, but not all of the transactions, and then had the nerve to lecture me -- an IT professional more than a bit knowledgeable about security -- about how somehow this was all my fault.
Turns out that banking security and reliability from a customer's perspective is absolutely insane. It's totally ass-backwards. It's the opposite of the Apple experience that made that particular company the biggest in the world.
1) Every field in a credit card transaction is attacker-controlled. They can put down whatever business name they want, whatever text they want, etc...
2) Every field in a transaction history is either an alias ("operating as xyz pty ltd"), an abbreviation, or just outright confusing.
3) Transaction histories and "you paid $ to X" notifications often turn up hours or days later. There's no geo-location or any other strong identifier linking these to the actual business because of (1) and (2).
4) There's no receipt details in the transaction history. "XYZ pulled $123 from your account... for reasons. It's a mystery!"
5) You can't see who's got recurring subscriptions on your account. You can't trivially cancel or block someone from pulling money from your account.
6) Some banks now show categorised graphs of what you're spending your money on, but they're guessing. They don't actually have the info of where the money went, so this is useless. You can't figure this out yourself either because of the tiny amount of info available to you.
7) You can't use your transaction history for warranty purposes, or any similar thing. You have to keep tiny pieces of paper that fade rapidly... which is I'm suuuure is just a coincidence, right? Right?
8) My bank claims I get notified if a transaction occurs on my account. This is a lie, they only notify me of some types of transactions, and not reliably either.
9) Trivial impossible-travel protections are not put in place. If my phone is used for a payment in a "physical store" while the GPS says it's in a different continent, pop up an "Approve Y/N?" prompt at a minimum!
10) You can't generally limit a vendor's access to your account if they have your credit card details. You can't restrict them to a single transaction, a fixed amount, or no-sneaky-subscriptions.
11) With shared accounts, you can't generally tell who made a transaction, even if they have individual cards and/or mobile devices. (You can sometimes, depending on the bank and the type of account, but it's not consistent. This is what happened to us: Both of us assumed the other partner set up a valid subscription.)
Etc, etc, etc....
I could go on for hours.
Unfortunately, like many people of said, the inertia of the incumbents and their moat of regulation makes this kind of thing nigh impossible with backwards compatibility.
Some org like Apple or Meta with very wide reach might be able to force vendors to jump through their hoops, which then will drag the traditional banks kicking and screaming into the future.
I'm not holding my breath.
This is because any company that has the potential for creating recurring subscriptions can do so to anyone at any time with nothing but an account number.
There is no pre-verification of authorization whatsoever. The only thing you can do is continuously monitor your bank statements and dispute the charges when you see something turn up, then hope for the best.
This system is croocked by design. Most people can't even believe it is this way , but presentations by budding fintech to small companies tout this 'feature' as the greatest thing since sliced bread.
There actually is a way they can sync up to say this is an authorized regular transaction and they get the ability to keep charging even when the old number expires and a new card gets issued.
I forget what it's called, and I don't believe it's supported everywhere.
Indeed, the entrenched investment industry has become less fair (or an outright liability) to customers, but casinos are at least honest with their customers. Gambling with other peoples money was not a real financial service until relatively recently.
There is a market for a fiscally sustainable savings/investment industry, but most people with under $2m in cash can't afford the bonded fiduciary services.
Good luck, I kind of admire their ill fated ambition. =3
> bonded fiduciary services
This detail becomes important when various cons come around to bleed off your assets. Could be as simple as a "friend" hyping worthless pump-and-dump stocks, or a fund manager with ballooning fees.
In general, the lack of impulse control shown on YC seems to indicate this information is not that useful for many readers. Some people like being poor apparently lol =3
They’re mixing up a securities term (irrelevant to banking per se and cash management totally).
What they mean is getting an adviser who is bound to act as your fiduciary versus as a counterparty [1]. If you’re trusting your portfolio management entirely to a third party, they should be a fiduciary.
That said, people outside finance seem to make a bigger deal out of this than it is—in America if you’re a retail investor and you have a problem with a FINRA-member broker, FINRA arbitration will almost always side with the retail investor. Fiduciaries will tend to cost more (it’s riskier) and say no to you more; after all, you’re asking them to take decisions for you. I work in finance and couldn’t tell you which of my managers and advisers are fiduciaries because I double check what they say and limit what they can do. And this, again, has to do entirely with investments. Not banking.
More pointedly, this part is nonsense: "most people with under $2m in cash can't afford the bonded fiduciary services." What you want for cash management is yield (reward) and sweep (risk management).
[1] https://www.investopedia.com/financial-edge/0912/5-misconcep...
Buy gold bullion, rent a bank safe deposit box, store it there. I suspect this is what comes closest to that, as of now. (Sigh.)
This is the worst of all worlds. You have a high-transaction cost volatile asset in a box which provides you with less legal protection than crap stored in a home with renter’s or homeowner’s insurance [1].
[1] https://www.nytimes.com/2019/07/19/business/safe-deposit-box...
While it is currently legal for US citizens to own gold bars since 1974, if the tax man gets hungry... the old rules may come back into popularity.
Best of luck, =3
Andreesen talked about this in his Rogan appearance. The banks and gov brought the hammer down on crypto because it was a legitimate threat to the banking cabal which runs the American Empire.
https://fortune.com/2025/01/22/donald-trump-net-worth-memeco...
Which leads me to believe that the only thing that could be honestly said is that a crypto is purely about winners and suckers and timing.
I don't really give this argument much credence any more. If the value of, say, gold or diamonds were to drop their practical-use-floor-value, they'd be valued at probably less than 1% (maybe much less) of current value. I mean, how much gold is actually consumed by industry? And we even have industrial diamonds now.
A friend argued to me that crypto is "A Terrible Thing" because its just used to fuel the (illegal) narcotics industry. At this point, I'm doubting that too - the market cap of all crpyto, and the value being transacted e.g. daily volume, has increased massively recently. Are we to believe that narcotics have caused that? I can't imagine so - more likely to me it's around 90-99% speculation which, you might well argue, is "Another Terrible Thing."
The same is true for crypto. It's fungible, private, and limited in supply. It's also independent of governments although they are doing their level best to correct that.
Just as not all crypto is equal, the Zimbabwean dollar isn't remotely like the Swiss frank, just as bitcoin isn't remotely like hawktua.
All money has always been about perception, whether we used paper, shiny rocks, or sea shells as money, it’s always been about perception. Is it real or counterfeit, do you trust the person you’re transacting with, are enough people you know using it, and will people with weapons show up to protect your money if someone else tries to steal it?
The “people with weapons” part turns out to be a key component. The novel thing about crypto is that you are less reliant on the “people with weapons” to protect you and tell you what you’re allowed to do with your money, and more reliant on the “people with encryption”.
It's not though. It became about that, in general, but there are crypto projects out there which don't focus on hype or valuation.
It is functional and useful to be able to move value worldwide for 10% of the energy of a credit card transaction, decentralized, at sub-second speed, with no fees, even when just moving tiny fractions of a cent.
There are a lot of maxis and bag holders trying to prevent people from figuring that out, but sooner or later a crisis will hit and everyone will remember what crypto was about in the first place.
Suppose the price of gold is 80% perception of value and 20% utility for making electronics etc. Then if you buy it, 80% of what you buy is perception of value. You could get the same result by buying 80% Bitcoin and 20% commodity rock salt. Is someone who buys the latter any more of a sucker? What about somebody who then decides to divest the rock salt because it has a below-market rate of return when they have no direct use for it?
The floor value of physical commodities with significant storage costs is negative.
The market is aware of these possibilities and these risks are generally recognized as being embedded in asset prices as premiums.
It's just that none of the blockchains have yet managed to situate themselves such that people are likely to value their effects. Instead they're focusing on scarcity, which is kind of silly because all of the competition is equally empowered to create artificial scarcities. I think they'll figure it out eventually.
A new fiat currency without a state sponsor is fragile by comparison. Always will be.
Even the scarcity is artificial, and based something between a contract and a gentleman's agreement, not any physical reality.
That is, the bitcoin software can be changed if enough people want to, to make more of it. And you can create infinite copies of bitcoin software and call it bitcoin or something else.
That's simply not true for the scarcity of gold.
Finally, insofar as there are uses for the blockchain, the ostensible finite volume of bitcoin has no bearing on anything, as you don't need 'one of 21 million bitcoin' for its blockchain functionality, you can use 0.1 or 0.0001 bitcoin. It's infinitely divisible, and a small unit of bitcoin can get you blockchain functionality.
And yet I've begun to put 5% of my monthly savings into it, as it seems to have become the long-term speculative asset. It doesn't seem to be going anywhere. But it really appears like an utterly ridiculous proposition, a self-fulling prophecy.
By the way, if you thought that Trump was doing something illegal, which certainly sounds suspicious, well it isn't. This guy gives a good overview of the why https://x.com/wassielawyer/status/1881995797245600248
Trump is the largest meme on this planet.
What should be the fair value of his fan coin?
What the banks have (now, due to long history) is a regularly regime where we expect the government to fix that credit when the bank gets those credit decisions wrong. In trade for that extraordinary treatment governments demand banks comply with a variety of regulations.
I’ve worked for a long time in the banking and credit space, no one I know in that industry thinks Andreeson did a credible job explaining modern banking. To knowledgeable people he came off as either fundamentally ignorant or extremely deceptive depending on your cynicism levels.
The fact we have a mechanism to create trust in trading debut is about assigning and managing risk in the payment of that debt, and transferring/holding that risk over time, which is a separate aspect to the raw creation of money concern (managing total debt loads).
As another commenter noted, anyone can create "money out of thin air". Come to my corner store and buy an apple on credit. Poof!
Credit was the original money, made out of thin air, and can be by anyone.
But, at least in the US, before the national bank acts in the 1800's, various taxing entities specified which bank notes (or other assets) they'd accept and not accept. It was basically whichever bank notes circulated the most with no/little discount, some gold/silver coins, some government bonds. Ie acceptance by a taxing entity isn't really a clear line on "is/is not" money.
Trading receivables has been going on forever, happens today, is totally legal. The corner store could sell the receivable, and many businesses to sell their receivables.
Offering someone credit in USD isn't making your own currency. The closest widespread version of that are community currencies[0], which the US doesn't seem to particularly care about -- I'm guessing because they're generally pegged to the dollar and promote local economies.
[0] https://en.wikipedia.org/wiki/List_of_community_currencies_i...
Consider how much business can be done on credit, and what constrains it. Infinite, and nothing. My corner store is not required to hold reserves against it's receivable. Apple (or a telco) is not required to hold reserves against it's receivable for a phone on credit. Their suppliers aren't required to hold reserves against credit on them. And so on all the way back to the folks digging stuff out of the ground.
Price instability, confiscatory and variable transaction fees, several high profile frauds -- including in a so-called "stable coin".
Crypto is its own worst enemy. Not the government.
You get none of those protections with cryptocurrency, which is exactly what scammers, criminal organizations, and financial libertarians want.
I can create money out of thin air with you, if you are willing to accept my credit worthiness.
Most of the cryptocurrency companies prove that this statement isn't entirely true though, unless I don't get it. That is, they generate cryptocurrencies out of thin air (credit) and say it has a certain value, then people pay them fiat money for those. They just generated value out of thin air and some compute cycles.
Amazing that more people don't know this. Most people will insist until their face is red that bank credit is a "loan" with equal debits and credits on both sides of the balance sheet. Wrong. The borrower's bank account goes up. And the bank's balance sheet goes up (the loan is an asset). Viola, new money.
What's amazing is that more people don't think this through. They just take the "thin air" story and that's it.
Both Alice and Bob's salaries are just credit at banks in the same system. If they sell their cars they get money from the same system. There's no way out.
The banking system's accounting trick to create money was proven by prof Richard Werner.
The limits on cash transactions are growing. To pay for something like a car you'd need a bag of papers as higher denominations to match inflation would never be printed. Cops can seize cash without much of an excuse. Customs can seize cash over 10k without much of an excuse.
A small bank can only go down if other banks don't trust them. Like SBV a couple of years ago. But their assets are taken by a bigger bank. Lehman Brothers was a rare exception and it looks like Goldman wanted them to go down for some petty reason. But the AIGs will always be bailed out.
More small banks going belly up and more bailouts are coming. The world is reducing exposure to dollar. Central banks are selling US treasuries and buying gold. The US dollar's empire is crashing down and the Western banking cartel is getting desperate. They'll try to drag the world into war or some other old trick.
In the end both are net zero.
Now obviously the liability will get zeroed out in the end, but in the meantime you get to keep all that accumulated sweet interest for ... uh... "managing risk"... it's a very beautiful thing!
So you have in fact created money out thin air, it's in the interest payments! You pay interest for basically "nothing!" (cough, cough, "managing risk"). And that interest does not get zeroed out! It's "pure" profit from an accounting trick.
So yes, as a whole the bank gives money from thin air.
Every bank does that. The US has more than 4,000 of them.
They've had a full, unrestricted bank licence since 2017 and have over 9.3m customers[1].
That right there is more unlikely than crypto becoming a credible threat to the banking establishment.
If you want to see a lot of dead bodies of rich people in the street, tell the rest of the world they can't have their smartphone and laptop and Xbox and Playstation.
That's a great way to get yourself killed.
Follow the money: Wall Street loves and lobbies for crypto.
The idea of 'disrupting banks' is gaslighting because it pretends that they operate within a 'free market'.
Best not to pay much attention to Andreesen though.
Of course, it was all supposedly being deposited into Deltec Bank, whose website was a Wordpress site, whose "Deputy CEO" couldn't remember the name of the country's two banking licenses, and which one Deltec held, or whether they held both.
I guess it's hard to track all of those things when you go from getting your Masters in Science at HEC Lausanne at 15, and immediately being appointed a Professor of Finance at a Lebanese university, all while running your own hedge fund, "Indepedance (sic) Weath (sic) Management" from Jacksonville FL...
Do you want interest and the conviniance and security of a real bank? Give it to a bank to look after. There are maybe some risks, but there's also risks with a bitcoin wallet or physical bullion (theft, losing it).
Do you want money now, and can pay it back later? The bank will loan it.
Are the banks in trouble? The government can regulate, and even rescue them. A run can happen, but as long as the government and banks say the money is there, who cares about conversion to a bitcoin or bullion?
There is an excellent book called "Stalking Giants" [1] that covers this story nicely. It's a fun read (especially for South Africans) and was published recently.
[1] https://www.amazon.co.za/Capitec-Stalking-Giants-T-J-Strydom...
It’s a realistic Star Wars story where the Empire always wins because… well it’s the fucking empire. They didn’t get there by losing.
The other side of the innovator's dilemma is the fact that the market leaders who don't stick to their current winning formula, instead risking big on a new technology, will sooner or later get it wrong and fail on their own. That's why it's a dilemma.
If the government bailed you out, you didn’t lose. They have yet to really lose. Thus no incentive to disrupt such a “steady” industry.
They’ve been disrupted on multiple sides massively in the last twenty years. Blackrock, Vanguard and Fidelity are disruptors to their deposit and savings-account models. Quicken et al a disruptor to their lending side. Private credit, securitised lending—all taking away their balance sheet operations.
Retail banking hasn’t changed inasmuch as people like branches. But the moment you go branchless the banking options radiate, and that’s more people every day.
There was a famous scandal with an Icelandic bank that was disrupting the market with higher interest rates.
If you are a big bank, you already have all the licenses and can do everything so what difference does that regulation make in practice?
If you could name a couple that you think stand out more usefully than banking, i'm curious.
As long as the USA stands, banks won’t change, and if the USA doesn’t stand, I’m not sure banking will even matter anymore.
My main bank account is with Halifax, everyday spend is with Starling. Then Monzo for anything risky.
Before Starling/Monzo the Halifax app was _crap_. Barely got any updates and was very basic.
Now? The Halifax app is on par with the newer banks, and sometimes even release new features before (e.g. scan cheque in to deposit).
Previous to the merging of online services, you are correct that Halifax had its own app and it was terrible. But at that time Lloyds had a great app, they just hadnt unified the back end tech of all the different bank brands they own.
It wasnt disruption from startups that caused the improvement, it was the parent company taking its time to merge the decent tech it had developed for itself.
In the UK, I can't remember the last time I wrote or received a cheque. Maybe twice in the 17 years I've been living here, and certainly not in the last decade.
So with UK cheque usage being a tiny fraction of the US rate, there's simply no demand for it in banking apps.
The over-65 age group is most likely to use them, and least likely to use an app, so you can see why it wasn't a big priority for most banks.
It's been at least 15 years since the banks stopped giving account holders chequebooks by default. If you want one you have to ask.
The only thing that can disrupt US banks is consumer outrage, of which there seems to be very little.
[1] Source: I've consulted for some of the largest US, European and African banks.
Lots of fees, bureaucratic, inconvenient opening times,...
In Japan, cash is king, and loan sharking is very prevalent. Not a very good sign for the banking system.
Note that it is now becoming increasingly possible to go cashless, though cash is still the most widely accepted option. And I think it is mostly thanks to foreign banks like Citibank.
As far as I can see, none of the fintech/web3/crypto-nonsense companies can be trusted to do those things well.
They are utilities that keep a database associating account number and dollar number.
I earn a few thousand dollars from them every year in the form of sign up bonuses, and I have never spent a dime in fees for having an account or transferring money.
If the US government offered a more protected way of saving money not subject to know-your-customer-revoke-access-to-your-property-at-anytime-under-the-guise-of-potential-criminal-activity laws, then I would use them.
https://www.doctorofcredit.com/high-interest-savings-to-get/
Capital One/CIT/Citi/PNC/Apple Card/Marcus/Ally/American Express are all reputable, big banks with long histories.
https://www.fidelity.com/spend-save/fidelity-cash-management...
Then customers scramble to find a replacement, which opens up the door to a new exciting bank, and history repeats.
If it takes experts to explain how Evolve/Synapse happened, why it couldnt happen to another "Fintech bank", and how to tell if you are at risk...then there is no point even venturing past Chase/BoA/Citi/your local bank.
https://www.reuters.com/business/finance/fed-penalizes-evolv...
However, current regulations favor banks, making it difficult for new entrants to disrupt the status quo without becoming a bank themselves. This complexity is further compounded by the intersection of regulations and geopolitics, which makes change particularly challenging. Additionally, while lifting regulations can encourage innovation, it must be approached cautiously to avoid potential financial disasters.
[1] https://www.fca.org.uk/firms/innovation/regulatory-sandbox
High Yield Savings Accounts? Amex offers a HYSA that is 3.8% vs LendingClubs 4.5%. How many people have enough money in savings to make the difference worthwhile and make them willing to trust a non traditional bank? I have a year’s worth of expenses in mine (in addition to retirement savings) and I wouldn’t even bother.
My bank is there to accept my money and let me pay stuff with it.
I'll wager that under $5k in savings, the $35/yr difference between those two account types might probably doesn't matter in the slightest. That opinion is colored by a couple of these neobanks "losing" thousands of my dollars for months at a time during transfers, the prospect of which seems much more dangerous to somebody with limited savings and likely only one bank.
Above $30k, you can easily and cheaply get a medium-touch experience with a company like Merrill Lynch (who themselves offer 4.2% even in zero-risk (outside of bankruptcy) accounts) and should maybe start looking at moving some of that out of a traditional savings account anyway.
It is so easy to move money around now there is no reason to keep that much in savings. It is crazy how easy it is to move money from a savings account to a brokerage account and buy a tbill in 2025 vs 1990.
Retail banking has really been stripped to its absolute bare essentials. There is no growth in banking in the US other than growth by acquisition.
I can't think of a worse investment than a bank startup.
Why is there still a hold for check deposits? Why do we still have banker's hours and business days for transactions?
There are plenty of ways banks could be improved
And who actually deals with physical checks? Even the various contractors I used when preparing my home for sell took some form of electronic payment
>took some form of electronic payment
These are nothing but electronic requests. No human needs to be involved, yet here we are. But sure, let's go ahead and argue like I don't have valid issues because you seem to not have any.
Credit cards are not taking deposits and issuing loans in a traditional sense, they are fee generation machines that are externalized which would not generally be "traditional banking".
UPI in India at least made payment system much better, by forcing banks in the end. So quite different.
In Europe, SEPA is doing something similar to India’s UPI, albeit much slower. Again by forcing banks on a standard, unlike in China.
https://www.bankingdive.com/news/kc-fed-has-revoked-reserve-...
I'm happy to use FinTech startup products for certain transactions -- CashApp and Wise are great and I might keep a small balance with them. But it takes decades of being around before people are willing to entrust serious deposits with them.
Banks were disrupted in the mortgage market - a very large chunk of residential mortgages go through brokers.
Banks are being disrupted in corporate credit. "Private Credit" is exploding.
Maybe I simply lack vision but I don't think this behavior maps well into the fundamental day-to-day livelihoods of every day people. Certainly I am not willing to risk my finances for marginally increased convenience or marginally lower fees.
The first thing those banks face when they open in Italy is a huge surge of difficult customers and they realize too slowly how difficult and expensive it is to abide to anti laundering.
6 months down the road they start closing accounts left and right just because you do too many operations and it's expensive to track them.
The reasons given for regulation are:
- protection from failure because of inability to not bail them out (and it has done a good job of this by and large, with some obvious risk oversights - e.g. silicon valley bank)
- money laundering regulations
The real corruption/monopoly in financial services that needs addressing are the amex/visa/mastercard transaction fees. The only way to fix this, in my opinion, is to have the consumer pay the fees.
So make it a 2 sided market, unify the processor into one of the sides. In other words, either a merchant co-operative or a consumer co-operative. In this case, a merchant co-operative seems a natural fit. The merchants jointly own the co-op, and get a refund of their fees proportional to the profit of the co-op.
And you get the consumers on board the standard way: by bribing them. So something like a 2% rebate. So the merchant fees stay at a similar rate, but the merchants win in other ways because they own the processor.
Nobody's going to become a billionaire starting a co-op, but an executive in a successful financial co-op would pull in a multi-seven figure salary, which should be sufficient motivation to interest the startup folks.
And Y-Combinator would have to loan money to such a startup, they couldn't buy in. But it's in their interest to do so, given how much of the Y-Combinator portfolio is dependent on credit cards.
Rewards cards already bribe me at 2% (and there are better offers). Big merchants often offer a store card, sometimes a store card that's also a general use card, but they typically bribe people with 5%.
The filthy anti capitalist socialists in Europe have already done that.
EU Interchange cap as follows: 0.2% of the transaction value for Visa and Mastercard consumer debit cards. 0.3% of the transaction value for Visa and Mastercard consumer credit cards.
Seems to work fine.
Meanwhile Canada has long been completely dominated by 5 or 6 massive big banks that charge high fees for basic chequing accounts, and where credit card perks are far stingier than in the US…
The financially industry is being _pretty massively disrupted_ by Wealthsimple.
- They have a cash account (~checking/savings hybrid) that pays much better interest than all the big banks
- They offer zero-commission trades on Canadian and US stocks and ETFs
- They appear to be preparing a wide rollout of a credit card which offers 2% cash-back on everything (there are few Canadian credit cards that offer more than 1% cashback as a "base rate")
Whatever spin they put on it (ecology typically) it's about them wanting to save 70 cents a month on postage. The fact they keep trying to slip it under my radar shows a disrespect for me as a customer.
More seriously, I could see it breaking the workflow of people who traditionally used the arrival of the statement as a trigger for other things (maybe they ONLY check their statement for fraudulent transactions once a month, or send off bills when they recieve it), and having it suddenly disappear breaks their workflow.
Rather than "we've got a shinier app" or a new way to insert a chatbot between you and the services you want to perform, a disruptor bank should be going all-in in customer service. If you want statements, you'll get them. No dark patterns or "we changed this setting because you gave us the vaguest hint of consent." First contact on the customer service hotline is straight to a human being. Nothing that requires a custom app-- everything online should work on any device with a browser, and 2FA should be a standalone token provided at the bank's expense. (Aside from providing a simpler UI, it's one more hurdle in turning "stolen phone" into "account compromise")
All the large national banks are interchangeable for a consumer-- they all pay dreck interest, and their primary selling feature is "you might find a no-fee ATM while travelling." But they'd be very suited to the customer-service pivot because they already have the in-person footprint that allows for handling the "I'm in over my head and want to go down and talk with an actual person to get sorted out" scenarios.
You see the same with big tech.
To get real disruption we need founders and investors willing to play the long game.
No affiliation but it caught my eye when the launched.
Admittedly it still feels abstract to me, but the value proposition of having every capability supported by an API (like AWS's methodology of having all services be API first) on top of an actually chartered bank seems perfectly fitted for the creation of banking services that are significantly easier for consumers to interact with and understand.
I'm curious to see what people build on top of it.
No product updates in over 7-months
That doesn’t instill much confidence.
Credit portfolio in 2023:
Itaú - $1176 billion
Banco do Brasil - $1109 billion
Bradesco - $877 billion
Nubank - $91 billion
Nubank also had the highest default rate between them (some 6%).
It was great when it was created (fully digital, no credit score check for a credit card), but it is now dealing with the same problems as the big banks
Nubank offers consumer credit (credit card, personal loans), but you're comparing portfolios that include mortgages, large companies, industry, agriculture, etc.
Similarly, the default rate of the entire portfolio varies according to the product mix, so you can't compare that way.
So called "fintech disruption" typically concerns just retail banking and is basically just: use an "app" instead of physical branches to cater to the mobile-native generations. Nothing that any old bank cannot also implement as an alternative channel.
Real disruptions do happen every once in a while and involve new financial products and business models (securitisation, derivatives etc.). But these are typically driven by legal rather than digital innovations.
Also, large banks fundamentally work. People with money want excitement and disruption away from their money.
[0]: https://new-wayland.com/blog/framework-of-a-basic-bank/
Or by "disrupting" does he just mean "end run around the laws and regulations"?
Is that true in the US? In the UK there was recently a period of around 150 years during which not a single new banking licence was issued. There's a film called Bank of Dave which dramatises the attempts of Dave Fishwick - a businessman from the North of England - to set up a local community bank. It's distressing the lengths that the established banks went to to quash it.
If I understand correctly, he still does not have a licence, although Metro bank did manage to get one in 2010.
Wiki article about the film: https://en.wikipedia.org/wiki/Bank_of_Dave_(film)
Guardian article from the real-life inspiration for the main character: https://www.theguardian.com/tv-and-radio/tvandradioblog/2012...
For higher margins lending products they are absolutely being “disrupted” by private credit.
I think services like Fidelity are meaningfully disrupting banks. I much rather have my money in a money market fund then a deposit checking account. Most loans are not being held on bank balance sheets any more either, but are getting sold to the market, so they're no longer as critical a part of the financing stack.
And we're still early days on stable tokens and the defi infrastructure around them.
They want to be heavily regulated so that new upstart competitors will not come in and spoil their cozy space. And it’s easy to justify because terrorism, money laundering, insider trading, etc etc. And many of these regulations are largely ineffective and easily worked around, whilst costing billions to the banks to comply with. Hence the moat.
We won’t get banking disruption until there’s banking deregulation.
Maybe in the US or some other parts of the world, but the Reserve Bank of India (RBI), the indian banking regulator, does a pretty decent job, as is evident from the public payment infrastructure they have fostered (see https://en.wikipedia.org/wiki/National_Payments_Corporation_... ) . They also create a competitive market by allowing small players to enter the market (e.g. https://byjus.com/free-ias-prep/payment-banks/). Many of their regulations also do a decent job of protecting consumer rights (e.g. https://timesofindia.indiatimes.com/business/india-business/... ).
They do take deposits but the major source of consumer loans, mortgages, are outsourced to Fannie and Freddie. Some big banks have lending arms in the form of credit card issuance, but short term loans like that aren’t really what people tend to mean and they aren’t why we chartered banks as a society historically. Small business loans are both vanishingly rare and governmentally backed.
The real disruption in banking going on right now is in large business lending. Commercial real estate, bonds, etc. Those are also no longer showing up on bank balance sheets. Capital regulations have made that too expensive, so the big banks are outsourcing that function to private non—bank companies. They just aren’t fintechs.
So disruption is absolutely happening it’s just on the finance side, not the consumer marketing side of the house.
If you count private credit funds like Apollo Global Management, the story is very different: private credit is seriously encroaching on the balance sheets of banks. Not very tech, but very fin. In investments, ETFs and podshops are both fin and tech, and crushing it.
Today, if I pay my credit card from an account with a different bank, the payment is reflected immediately in my Visa account, but takes 3-5 days to reflect in my main checking account. It's completely bonkers that a 100% electronic transaction takes days to fulfill.
FedNow's list of participating financial institutions on their web site is a downloadable Excel spreadsheet. Innovation indeed.
https://www.revolut.com/en-LT/credit-cards/
I guess they'd need to apply for banking license to offer CC in every EU state and that would be an order of magnitude more expensive than Lithuania's banking license
All it takes to operate in the EU is a license from one member state.
It will take more than a credit card or fancy app to disrupt this corrupt machine.
On the other hand when it comes to serious money spending (credit, mortgage) I want my physical local bank.
Plenty of startups have disrupted banks. AMEX purchased one to jumpstart its small business checking accounts just a few years ago. You're just not looking hard enough.
If you move the goal posts to core checking/savings accounts by consumers, then yeah there's not much of an upside there. Consumers go decades to lifetimes on average without changing banks. Capital One was the last one to do anything "disruptive" here re: providing accounts and credit to the lower class, and I'm not sure there's enough juice to squeeze left for a smaller, more focused product to make any money given the stickiness of checking accounts generally.
Look how that turned out.
https://www.ing.com/Newsroom/News/Press-releases/PROld/ING-t...
A tiny deposit for a bank to hold means 7x more money to loan out, or something?
Per Mark Marc Andreessen the Biden admin tried to shut down crypto entirely But with the new administration we'll hopefully see growth and real competition to the old banks.
Crypto can replace some banking functions, such as payments, electronic transfers, and lending/borrowing.
One could argue that crypto eliminates the need for traditional checking accounts since you have full control over your funds with private keys. However, this doesn’t account for the legal safeguards and protections that banks provide.
> Am I going to get a mortgage in BTC?
I don’t recall seeing mortgage services in crypto yet. However, there are borrowing platforms like AAVE, primarily used for leveraging crypto investments or speculation. These platforms are decentralized, with strict collateral requirements, typically limiting borrowing to 80% of your collateral.
> If narrow banking, why give them my btc at all instead of holding myself?
Not sure I fully understand your question, but typically, when you lend your crypto to a service, you’re seeking to earn a yield in exchange for the risk of lending your assets.
> Does that even work on blockchain?
Theoretically, yes. You could create a narrow bank using crypto, but you’d need a decentralized mechanism to verify the bank’s holdings. This could involve creating an oracle (ex: Chainlink) service to confirm asset reserves.
> How do you do fractional reserve lending with a deflationary and one of one asset?
Instead of using deflationary assets like BTC, fractional reserve lending could rely on stablecoins, which are better suited for such systems. That said, not all stablecoins are equally reliable.