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What does "disruption" look like in the banking space? Banks want the perception of immovable, confidence, reliable, resilience, etc. It's what gives them the credibility to move big money. They don't want to "move fast and break things". Some may think about digital currencies.

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.

I'm not worried about the government doing these things, I'm worried about corporations colluding to do these things.

That's basically the same thing.

At least we pretend to have accountability in the government.

Government accountability definitely feels like it's at an all-time-low

Why would "the government" do that? I hate it when people talk about "the government" doing something.

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.

The government already does this.

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.

This was actually a fascinating research topic for me, because I can only agree that it seems arguably hostile or at least silly and backwards.

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.

In 1977 I can believe it as an anti competitive thing.

Today though, there's plenty of legislators who are happy, and vocal, to keep something like this there out of a paternalistic spite towards the poor.

The house has actually introduced legislation to remove the "hot food" part. It's been referred to a subcommittee of the Agriculture committee, but I can't find any hint that they've even discussed it. I've actually struggled to find any evidence that the subcommittee has discussed anything.

I agree with you that it seems likely that some legislators would fight to keep it with some bad arguments, but right now they haven't even had to make those bad arguments because nobody is pushing it.

The conclusion I can draw is that nobody cares about it. It was included for free market reasons and kept around because nobody gave a shit.

This is all seen as acceptable but try tying a tax break to hiring or investment and you'll hear screams from the stock buyback board

It's meant to prevent side hustles like buying Big Macs and selling them for cash.

Sure, but it also prevents poor people without access to a kitchen from having hot food.

Do we even know that people reselling hot food would be more of a problem than people reselling cold food? Wouldn't it just be easier to review the transaction data and detect patterns of actual fraud? Is the cost of doing any of this actually lower than the cost of fraud?

Exactly. Poor people are then forced to burn stuff to make heat, which often releases carbon dioxide, unlike clean burning methods using magnetrons.

Forced to? No.

Requiring people who get government money for food to not use it on prepared food is a good thing I would think. Technicalities like the one you presented do seem ridiculous on their own however.

If you're so poor that you can't afford food, what are the chances that you have access, time, and ability to turn ingredients into meals every time you need to eat.

I'm totally fine with a person on SNAP using it to get a hot or prepared meal if that's what they need. We have already decided to allocate the resource to them for the purpose of buying food, why does it matter if they spend it on a premade sandwich instead of a frozen burrito.

You can think of it in terms of political parties, if it helps.

"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.

I don’t really understand your point.

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”?

That would indeed be a bad point, and basically a conspiracy theory. I do not believe that.

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.

These incentives already exist. The tax code has been manipulated to encourage or discourage behavior since at least WW2. A digital currency makes a lot of these incentives easier to create and easier to enforce, but they wouldn't be new.

It's a huge difference. Incentives are one thing, being able to force or take money directly is a whole different level.

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.

The Federal Reserve is a bank. And we already have a relevant historical example to examine, postal savings accounts. I'm not aware of any special power that the executive branch had to bypass the judicial branch where those accounts were concerned, versus privately held accounts. Plus, the Post Office was directly answerable to the President then, while the Federal Reserve has never directly answered to the President. This is an unfounded fear and doesn't reflect anything intrinsic to a (central bank-administered) digital currency.

Not for consumers and non-bank businesses it isn't. You don't have an account at the fed. You have an account at plain old commercial bank. Someone at the plain old commercial bank can freeze your money, right now. You'll have to sue, go to court, win, just to get access to your money.

If the fed becomes the place you have an account, they can do what the commercial bank currently can do.

The difference is incentives - why do it? Commercial banks have no incentive, and in fact have the incentive to push back when asked.

As for the president - sure - generally speaking the fed is independent. But they have significant regulatory and supervisory roles all by themselves, and are part of the administration of the government even if they aren't "part of the administration" as the term is usually used in the US.

Commercial banks answer to the government, to the central bank, to their shareholders, and to their non-governmental regulators (payment networks, insurers, etc). This has created plenty of examples of "debanking" of businesses and individuals who bring with them excessive risk due to their history of attracting controversy and/or legal trouble.

Whereas, the government can of course confiscate assets already, including through commercial banks, but generally cannot refuse service. If a CBDC becomes the norm, an account held at the central bank becomes a right, and thus refusal of service becomes a punitive measure subject to statutory and constitutional limits and scrutiny. This is arguably better than the commercial bank situation, where "business risk" is (generally) a valid reason to refuse to provide service.

The incentives/goals are the issue. By and large, commercial banks want to do business with you. They are subject to constraints, but they want to do it. They can/do also push back, they aren't just doing whatever the government says.

an incentive is meant to encourage, not to force.

They are not equivalent. A digital currency turns suggestions into orders.

Whether to nudge or to force is a policy choice, and is orthogonal to the question of digital currency.

Cash is already practically gone in a lot of countries. I don't know anyone who uses it and don't even know how the bills look nowadays. Must have been at least 10 years since I even touched physical cash.

To the detriment of many. See https://news.ycombinator.com/item?id=42696204

My main issue with cash is that I hate receiving coins. If it weren't for coins, I would try to do occasional transactions in cash, just to support something that is truly anonymous.

But the option is there. It matters.

It only remains if people who have choices actually prioritize using cash.

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.

I rarely touch physical cash, but when I do I feel like I need to wash my hands.

It might be bad but it isn't self evident. There are several contexts where it would be useful to have. To keep it generic, people can be forced to do all kinds of things. A lot of people cant manage their money. Putting the exact amount in a rent account would be better and cheaper than being put under some kind of supervision.

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.

The other thing stopping it is the law and the fact that the US dollar is the global reserve currency and that would be a pretty great way to ruin that

> that would be a pretty great way to ruin that

Not really. It would be similar to tax rules—not really applicable to non-American depositors.

It _could_ be like that. But we’re very deep down slippery slope hypotheticals by this point.

A digital dollar is not down some rabbit hole of hypotheticals. The fed (amongst others) debate/study it. Published this a couple years ago:

https://www.federalreserve.gov/publications/files/money-and-...

We’re not talking about a digital dollar so much as a government mandated spending program for all citizens or perhaps retail account owning individuals.

> we’re very deep down slippery slope hypotheticals by this point

Not really. We're talking about how the U.S. government treats local deposits at American banks. That's not really relevant to the dollar's international role.

I mean, the government in the US already loves dictating what poor people can spend their money on when they get assistance.

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.

You can't buy luxury food because people will turn around and sell it. Beggars can't be choosers.

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The products being pointed out in this article as an attempt to disrupt banks seem to be basically the same product for a different price. Like, a high-yield savings account is just a savings account with a better price, right? How do you disrupt an industry by selling the same products? The advantage of startups is that they're more nimble, can pivot to fit the market better, and can adapt to customer requests faster. None of that applies to "selling the same product at a lower price", especially for savings accounts where stability ("the company not suddenly disappearing") is an important part of the pitch anyway

This is a very US centric article, a lot of the disruptions listed are incumbent 'big bank' products in other jurisdictions. I feel the lack of adaptability is likely a result of US market conditions/regulations rather than lack of innovation.

The EU also has put pressure on Banks for decades now to either "innovate" or "get innovated" by regulations forcing them to implement innovative ideas not coming from them.

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.)

In some markets paypal has no market share at all - its whole value proposition is something that banks allready have.

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

In both the EU and US PayPal is very widely used to pay in online shops. To a point that disabling PayPal temporary can show noticeable decrease in sales for most online shops, especially if international orders are involved.

When I sayed "competing with PayPal" I meant for paying online, i.e. alternatives to both PayPal and Credit Cards. Not p2p money sending.

Paypal has no market share in Poland for example. Where you can just sent instant transfers.

Also you never replied about paypal not being a real bank, ao it can block money for months. Are you connected to them in any way?

> Also you never replied about paypal not being a real bank,

why should I reply on things which have nothing to do with the discussion?

This never had been about weather PayPal is good or bad or anything, but that it's is very dominant in huge parts of the (western) world _for online shopping_ (not for sending money between people). Something which is a fact weather I like it or not.

> Are you connected to them in any way?

no

through the way you jump from a normal discussion to conspiracy theories is not normal, are you trolling?

Paypal (or its little brother Venmo) haven't been needed in the US in nearly a decade. I've never had a European bank account, but Zelle seems to me to be just as good as what the Europeans have.

Paypal is never needed, not in the EU nor in the US but that misses the point.

Pretty much every single online shop/website ever allows paying with PayPal (and Credit Card). And you pretty much have to use it as not allowing paying with PayPal will reduce your sales noticeable, especially for international orders. This is something people funnily frequently rediscover, again and again.

Also I don't thing many people do use PayPal to send money between each other tbh. when I mean competing I mean for paying online not for p2p money transfer. Like sending other private people money always had been trivial, through slightly annoying, in the EU, even before smartphones where a thing.

US Banks are much worse at serving common people than many other old big banks around the world, certainly compared to Germany's banks for example.

And yes it is thanks to a byzantine system of history, regulations and very few Americans travelling abroad to experience radically better systems.

FATCA makes Americans pariahs at foreign banks. I would love to store cash outside US jurisdiction but it is a compliance nightmare usually only worth it for high net worth clients. We know better systems exist, we just often can't use them even when we live overseas.

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.

I'm a middle class American that has lived in various places, Canada currently.

I opened my first account in Canada while I was still a US resident. FATCA compliance was a matter of a single extra form, and providing my US SSN. It was about the same for my Caribbean accounts with international banks.

If what you are trying to do is open an account that is not visible to the US government, that is much harder.

Crypto is not banking.

I think it could also be cultural. In my country people are perfectly happy to have a video chat with a bank employee about mortgages but in other country's you still need to go into a branch office for that kind of thing.

I (American) didn't need to go to a branch office for my mortgage. In fact, I don't think my mortgage provider has branch offices.

Just curious, why do you need a video chat? Can't you just have a phone call? I don't get the need to see someone's face

Why do you need a phone call? I just had to take some pictures and fill in some details on their app, and a day later I had the mortgage to my home.

I don't get the need for synchronous comms at all. I can book airplane tickets, food delivery, e-commerce generally, and most other things through a web interface. Not sure why I need to talk to somebody to get a mortgage aside from Know Your Customer but even then a short signing ceremony at the end would be best.

Because a lot of people don't understand how the products work or what they need. Trying to understand a complex product, with multiple options that come with advantages and disadvantages, and having adding on top that it's a very consequential decision is much easier if any misunderstanding can be corrected and explained real-time. The alternative is to do it async with some lead time for every back and forth.

Your pizza order needs no clarifications and if you get it wrong, it's just a pizza. If you misunderstand your mortgage you're looking at far more costly consequences.

You should never be taking the advice on such a thing from the person who has a vested interest in you buying it.

Although you could well be right about the nature of the transaction, it's definitely a bad idea to be doing that with the bank!

This applies to everything, a mechanic, a lawyer, a dentist. You can't have all the prerequisite knowledge on every field where you may need to make big choices so eventually you'll need to talk to someone.

If it's not the bank, and it's not you, it has to be someone else. You can ask over email for all the information available on the products from the bank and take it to an independent advisor. Eventually you'll run into the need to have a live chat with that trusted advisor or risk moving one mail per day in each direction trying to explain what you want and what you could get.

That's why there's independent financial advisors.

For some people, the mortgage application process can be complicated.

Maybe I'm in graduate school and my salary is called a 'stipend' and I don't get any payslips, plus I have a part-time job in sales where my base salary is very low and about 75% of my income is commission, and also my girlfriend will be helping with the mortgage, but not the deposit, and she's a Ukrainian refugee and self-employed content creator.

An expert who's seen it all before would know how to navigate my situation properly.

That doesn't make any sense. At least in the USA, if the school is paying you then they have to issue you either a W-2 or 1099, regardless of whether they label it as a salary or stipend or whatever. Mortgage lenders are accustomed to verifying income from sources like that, it's not complicated.

Here in the UK a 'stipend' from EPSRC or similar is not classified as income for purposes of income tax or council tax. It's treated more like a scholarship.

> That doesn't make any sense.

Tell me about it. They still won't give you a mortgage, though.

I agree! I am a big fan of synchronous comms

I think getting a mortgage might be a tad more of an impactful decision than ordering takeout... I'm not a boomer but I still would like to speak to someone in person before I sign an O(million$) loan.

> I still would like to speak to someone in person before I sign an O(million$) loan

Why? I’d much rather have anything said in writing.

I have had video chats with my bank. The video part was not super important but nice given the magnitude of the transaction (house loan things). The more important part was the screensharing to sho the advisors calculations and other info.

Why do you need someone to show you the calculations? All of the important numbers including principal, fees, points, interest rate, and amortization schedule fit on a short PDF. You can verify the calculations yourself on a pocket calculator if you want, it's like grade school level arithmetic.

There are different sorts of loans that you can do in different ways. It certainly does not fit a short pdf (I am not in the US). So it’s nice to have someone walk you through that consequences of the different choices.

I (for one) prefer video chats to phone calls.

There is a reason why "face to face communication" is a phrase.

I don’t even need to have a video chat in the US for a mortgage. I have long been able to shop from any number of lenders and close the deal via email. The lender might send out an appraiser.

The US crash of 2008 exposed the nature of their banking system leverage ratios, and worker 401k vulnerability to dubious ETFs.

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

ETFs are a relatively recent phenomenon, the criticism I remember from 2008 era is having paycheck + employee stock purchase plan + 401k concentrated in a single stock - employer's.

ETFs are mostly irrelevant from a 401(k) perspective because no one is trading on a daily basis. Some 401(k) plans do now offer ETFs among the investment options but for the most part they have always focused on regular mutual funds. Average expense ratios have come down a bit since 2008.

Regular mutual funds usually have higher risk and tax exposure than the ETFs...

Met a lot of bums in suits trying to sell me on several flavors of BS over the years. lol =3

You seem to be confused about finance. There is no particular connection between a fund's risk and tax exposure, and whether it is exchange tradable or not. Some regular mutual funds are very low risk. Some ETFs are very high risk. Tax exposure is largely irrelevant for 401(k), IRA, and other tax-free retirement accounts.

> no particular connection between a fund's risk and tax exposure

They seem to be posting a lot of word-salad comments, but assuming good faith, they're saying these are separate downsides of mutual funds over ETFs.

Mutual funds trade on your behalf, like an ETF, but they pass through the gains and losses. That can be painful if they realise those gains when you'd rather not have them, or crystallise losses when you don't have offsets. In this, they're correct. On risk, they're wrong--you can stuff nonsense into ETFs as comfortably as mutual funds. What they're indirectly criticising here is active versus passive management, which is its own can of worms.

The only advantage of a mutual fund over an ETF is it provides friction to trading. Otherwise, they're a vestige from the cusp of computerised portfolio management. (If you have more than ~$1 to 10mm, you should be rolling your own portfolio in most cases.)

This account posts a lot of off-topic straw-man arguments, and wild context guesses like regular bot slop.

My issue with bank-fool recommend mutual funds is primarily they are often a self-serving structured product. i.e. the odds a sucker never sees a consistent behavior is far greater than random chance, and a unconstrained arbitrary guess of a chicken would likely perform better in the markets.

Best of luck, =3

> bank-fool recommend mutual funds…the odds a sucker never sees a consistent behavior is far greater than random chance

Again, you’re criticising active management in general. (And seem to be mixing up alpha and tracking error. Passively-managed funds aren’t aiming to outperform the market.)

There is no evidence actively-managed ETFs (or hedge funds, for that matter) outperform actively-managed mutual funds. There is also not a material difference in tracking error between their passive products.

ETFs are a retail product. Like mutual funds. Make financial decisions based on the product, not the wrapper. (Also, where in the fuck does one go to get mutual funds in 2025 anyway?!)

How many SS's are in "Slow Mississippi bass" ?

You have exceeded my off-topic straw-man limit for the day.

Best of luck, =3

    > This account posts a lot of off-topic straw-man arguments, and wild context guesses like regular bot slop.

"This person posts lots of intelligent things"

A broken clock is still right twice a day...

Thread hijacking is not necessarily intelligence, but rather an attempt to cow people with off-topic rhetoric. However, I do respect your opinions =3

    > Regular mutual funds usually have higher risk ... than the ETFs.

There are several potential mutual fund problems, but the ones most consumers are exposed to arise from institutional and private "investment advisors". There is no legal protection from banks externalizing toxic assets acquired though risky decisions onto customers, and or ridiculous ballooning management fees siphoning off actual profit. The other issues are mostly from various end-runs around acceptable market rules and practices.

In general, most amateur holds permute well below 3 to 4 months on average. Note the old joke: "Bulls make money, bears make money, pigs get slaughtered"... was never funny for those providing cash capital to gamblers.

Most people assume they are luckier than average... and most of Las Vegas was also built on losers money.

Have a great day, =3

You’re mixing up adviser fees (ETFs have lower fees than mutual funds; neither is directly related to adviser fees), toxic assets, CMOs, balloon mortgages and possibly management fees and carried interest. These are related concepts inasmuch as they’re all financial terms.

You seem confused by my frustration with tools towing the company line rather than providing reliable investment advice.

Personally, I prefer retaining the option to sue people that pull stunts. But to each their own... =3

> I prefer retaining the option to sue people that pull stunts

If that's an option for you, sure. I work in finance and retain FINRA arbitration as a customer. When I'm signing with clients, I do not like to include it--I have a strong advantage in court and don't want a venue that's biased against me as a professional.

All of this is totally irrelevant to ETFs, mutual funds and CMOs because those are distributed funds whose terms aren't negotiable after offering. (If you're worrying about suing the guy selling you ETFs, you're doing something wrong. Probably overtrading.)

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> having a robust legal position is still rather important

Zero competent securities lawyers will argue waiving FINRA arbitration universally puts one into a more robust legal position.

For most Americans, it waives significant consumer safeguards and opens up realms of litigation tactics that are barred by industry rules but not law.

I'd believe this in very specific contexts but I can't find any reliable explanation of what those might be. Can you point me to anything worthwhile to read on the topic?

I am fairly certain that consumer and employment pre-dispute arbitration agreements are strongly negative but I haven't learned enough about FINRA/securities arbitration to have a strong opinion.

In general, forced arbitration is not an effective legal posture for investors, and a common instrument applied to suckers.

Sociopath structured parasitism always poses a liability around treasure. Handle or hire your own due diligence solutions... Seriously, don't assume either of our nonsense applies in your country. =3

https://www.youtube.com/watch?v=aNSHZG9blQQ

Do 401k plans allow people to buy single stocks? I never saw it in my experience. I cannot believe that would be considered "prudent" by financial regulators. However, when you leave a company you can "roll-over" your 401k into an IRA, then you can go wild and buy anything that you want (IBRK allows it).

i401k’s which you have to manage yourself if you are a contractor allow you to purchase whatever you want depending on where your account is. I was with Vanguard and they do not allow it - I moved my account to etrade and now my 401k account is basically like my brokerage account, I can buy whatever I want.

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Plus hum, would you deposit large money amounts in a small fintech company ? The advantage of giant banks is that you sort of trust their size will make them able to weather a crisis, if only because so many taxpayers are involved that the government has no choice but to help.

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...

It's not just size. Real banks maintain customer deposits in separate named accounts. They don't co-mingle funds like fintech companies. This makes a huge difference in the case of insolvency or any sort of fraud.

I considered doing it a few years ago with a company called Yotta, and thank God I didn’t, because they pivoted to a gambling app before losing track of user funds when one of their providers went bankrupt.

Ideally, financial regulation should be there for you in terms of bank failure without you having to trust old players and further making disruption harder. And no matter how big or small the bank, you should never put all your savings in the same bank.

One datapoint: On /r/PersonalFinanceCanada a very common advice is to save money in WealthSimple or Questrade type of online financial institutions. And people seem to be very happy with doing this.

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.

Wealthsimple is a subsidiary of Power Corporation, a gigantic financial services company that has existed for 100 years. Its success is more an example of insider innovation rather than outsider disruption.

As I understand it, Wealthsimple was founded independently but then quickly bought by Power Corporation.

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?

Interesting. I did not know that. But not surprising in retrospect.

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.

I don't know if the point should be that people won't use a startup bank, just that the assets being directed to the startups/disruptors are not presently threatening to the big banks. I would suspect this is currently the case with WealthSimple here in Canada as well. WealthSimple is at something like $50 billion assets under management [1].

Vanguard asset allocation ETFs are at like $1.3T [2]. 4 Of Canada's Big banks appear to add up to just over 2T Assets under management based on what Google just gave me as summary. So while I think this is a great outcome for a startup (even with Power backing them), to me it seems in a similar space as the above article that we're still talking a relatively small market share, and likely still closer to early adopter status.

[1] - https://en.wikipedia.org/wiki/Wealthsimple#:~:text=As%20of%2... [2] - https://www.vanguard.ca/en/product/investment-capabilities/a...

I don't think the total assets under management is the correct indicator. Vanguard, Big 5 Canadian banks, and even Power Corp cater not only to consumers but also to institutional investors and ultra high net worth individuals. Wealthsimple, to the best of my knowledge, is purely consumer-facing. It is not competing for the same markets as the other ones. Its parent company Power Corp, which is competing in the same area, has an AUM that is comparable to the Big 5 banks. I wonder if there is enough public data to compare consumer products in isolation.

> WealthSimple is probably not perceived by the median customer as a traditional bank.

Well in fairness Wealthsimple is an investment management platform providing some bank-like features through their partnership with other Schedule 1 banks (previously was Equitable Bank, don't know if they are still with them).

Wealthsimple calls themselves a non-bank [0]. My understanding is that when Wealthsimple says that funds are CDIC ensured, they mean that they are held in a bank account from a third party bank whose funds are CDIC ensured.

I am not a lawyer or a banker, but Wealthsimple always scared me a bit after seeing what happened to (albeit far sketchier) Yotta when a fintech company they relied on (Synapse) folded. While funds are insured, if your funds are not "lost" but simply inaccessible, the insurance isn't really worth anything. Likewise, my understanding is that if WS goes belly-up (unlikely) there's a possibility where funds are still made inaccessible and the CDIC insurance doesn't kick in since the third-party bank is still alive and well.

[0] https://archive.is/58zoJ

Ah that's an interesting tidbit. I have a Wealthsimple account through my (YC company) employer. The Desmarais (Power corp folks) gave me a scholarship back in the day. I hadn't made the connection.

Glad you're not the only one to point out Canada's comparatively stodgy financial industry. https://news.ycombinator.com/item?id=42838063

The account management interfaces of Canadian banks are pretty universally terrible. Even the neo-banks like Tangerine.

Tangerine still insists on making login credentials your account number, and a 4 digit pin. There used to be a second system where they'd show you a secret combination of images after login and you'd provide an answer to one of four security questions, which kinda made things better as I just provided passwords as the answer to the questions, but now they've replaced that with drumroll SMS 2FA.

Security is a clown show at Tangerine, I no longer use it and can't suggest other folks do.

Indeed. Their 2FA manages to hit the sweet spot of being incredibly laggy, never remembering me, and maximally insecure.

> I no longer use it and can't suggest other folks do.

Same. I was lured in by their interest rate bonuses a couple years ago, but they're no longer offering anything that isn't beat by WealthSimple and others.

Come to Germany and try Deutsche Bank. Those monkeys are just throwing !@#$# at the wall. Moving from the US to Germany is like taking a time machine to another era when it comes to online banking.

>Like, a high-yield savings account is just a savings account with a better price, right?

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.

"Neobanks" in India, although not disruptive, are doing rather well. In general, though, the real disruption Fintech can bring is by working with existing trusted entities, not against them.

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/

Finance is heavily regulated.

Disrupting a heavily regulated market is usually called ‘racketeering’ or ‘organized crime’.

Regulation is the racketeering. The central ringleader is the fed, who 'ease' money into thin air, bypassing the pesky annoyance of going around and collecting taxes to fund their private and public benefactors.

Hey, you can assert cops are the real criminals all you want - but one of them is thrown in jail, and the other (typically) isn’t.

It does share the characteristic it was secretly planned under assumed identities (on jackyll island) and intentionally set up to be 'governed' by unelected bosses intentionally firewalled from democratic processes.

I can tell you right now what I want from a "bank" as a consumer: Putting the consumer first, not seventeenth or whatever I typically experience with retail banks.

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.

"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"

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 is no pre-verification of authorization whatsoever.

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.

This "feature" pisses me off. I was going to switch to capital one virtual cards but from reading around it seems that these two can be updated and even have spending limits overridden in the case of subscription services. Since protection from overcharging is the main draw that product had it seems like a useless feature once I read the details. They bill it as a benefit but with the possible exception of my life insurance I'd much prefer it the other way.

It seems to me this feature should just come disabled for virtual cards, as that's the whole point of virtual numbers.

Personally though in a lifestyle with like a dozen regular recurring credit transactions I'm not likely to cancel on a whim or forget (electricity, gas, daycare, insurance, internet, etc.) I'm fine most of these entities getting a more stable identifier for billing but I do agree it would be better to be opt-in on the cardholder side.

I "solve" most these issues by using a different tool/layer (YNAB) on top of my financial institutions so that I can see all my finances in one place with a good UI and and API. I agree things should be better, I just wanted to share how I handle tracking payments and bring some level of sanity to my finances.

Why involve banks in day-to-day financial transactions? The way debit transactions work is batshit insane. One of the reputable credit card providers is much better. Amex, Chase, or Citibank are very good. Citibank offers virtual account numbers with adjustable expiration date and daily spend limit.

If these things bother you, consider a service that offers virtual credit cards. Privacy.com or Revolut.

Most people have zero notion of what money is... let alone what banks offer as a business.

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

It is a legally enforceable relationship with your investment managers: "A fiduciary financial advisor is a financial advisor who is legally and ethically bound by fiduciary duty to serve in your best interests"

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

> never saw this term before

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...

While phonetically similar to a "securities term", the conversation was about legal agreements with a registered professional.

I think you are feigning ignorance for some reason or posting AI slop,

Best of luck =3

> While phonetically similar to a "securities term", the conversation was about legal agreements with a registered professional

No. A "bonded fiduciary service" is not a thing. That's why there are literally zero hits on Google for that string.

You're thinking about an adviser--who must be a registered professional in the U.S., but that's a separate topic--who agrees to be bound as a fiduciary. (Bonding is a surety concept [1]. If someone is arguing their fiduciary duties are stronger because they're bonded, please report them to your regulators because that's nonsense.)

[1] https://www.investopedia.com/what-does-bonded-mean-definitio...

How many SS's are in "Slow Mississippi bass" ?

I already donated to the Yellow Feather Fund friend, as I recognized some people are very special in this world =3

> fiscally sustainable savings

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.)

> Buy gold bullion, rent a bank safe deposit box, store it there

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...

Renter/homeowner insurance rarely cover precious metals unless they are in their highest premium ( read worst as store of value ) forms as jewelry or kitchenware. A vault with stronger property rights than US and insurance is probably better than your house (Singapore insured PM vault maybe) but not as good as a hole in the ground somewhere where metal detectors get a lot of false positives somewhere remote with no attachment to your identity.

> Renter/homeowner insurance rarely cover precious metals unless they are in their highest premium ( read worst as store of value ) forms as jewelry or kitchenware

You're already paying a double-digit round-trip spread on retail gold. The point is out of all the places you could put physical gold, safe-deposit boxes max out the worst attributes.

Precious metal prices rarely track with inflation, but 1.7% of a portfolio should contain such leaky holdings.

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

No one is disrupting banks because the mega banks have the sole power of creating credit out of thin air, and no upstart fintech company has this power. To gain this power requires the creation of a bank, which as you can imagine, is probably the most gate-kept activity on earth.

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.

Yes and crypto doesn’t have any inherent risk like a sitting President creating a crypto currency where he has 80% of the currency, will probably make a half billion dollars and then do a rug pull.

https://fortune.com/2025/01/22/donald-trump-net-worth-memeco...

That’s the thing I can’t ever come to understand about crypto. It’s purely about perception of value. At least with some precious metal, it has a floor value as a function of its practical uses and abundance.

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.

> At least with some precious metal, it has a floor value as a function of its practical uses and abundance.

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."

I think the main thing precious metals have going for them is tradition. That’s no small thing. They’ve been considered valuable for millennia, and that’s likely to continue. Bitcoin might be replaced by some other fad in a decade.

It’s like if you’re betting on a religion, Christianity is more likely to last than Scientology. They might both be equally made up, but one has demonstrated staying power.

It's of course not the criminal use of crypto that has caused the price to increase so much lately, but the use of it for criminal activity is one of its main real use cases (apart from speculation which is not a real use case).

> I mean, how much gold is actually consumed by industry?

[0] indicates there's a demand of about 5000 tonnes of gold per year, with about 560 tonnes going into technology and electronics (the vast majority still going to jewellery). The total amount of gold in the world is about 212.500 tonnes according to [1], which is a cube of only 22x22 meters. [2] says about 3600 tonnes are mined per year and about 1200 tonnes is recycled/reused.

[0] https://www.gold.org/goldhub/research/gold-demand-trends/gol...

[1] https://www.gold.org/goldhub/data/how-much-gold

[2] https://www.gold.org/goldhub/research/gold-demand-trends/gol...

> A friend argued to me that crypto is "A Terrible Thing" because its just used to fuel the (illegal) narcotics industry.

That's a good thing, though.

Jokes aside, as a person who loves crypto technologically and agrees with the more cipherpunk roots of bitcoin, I have not seen anyone serious use crypto for anything other than drugs or small transactions, just for the sake of it. People usually just seems to hoard the stuff, which is incredibly stupid since the main value proposition of crypto is being able to transact it. I almost respect the people buying drugs with it more, since they at least use cryptocurrency, rather than just speculating in its value to fuel their gambling addiction.

> a person who loves crypto technologically and agrees with the more cipherpunk roots of bitcoin

Yep, that'd be me too. What gets my blood pressure rising is the sheer amount of coins & tokens available now all of which, bar perhaps a tiny fraction, seem to have no value proposition other than "number go up". To me, NFTs are the nadir of this concept. I struggle to imagine a legitimate use case for any crypto that doesn't involve rapid, frictionless transacting.

For example, there are a couple of fantastic services, like "Cauldron DEX" or "BCHBull" (no affiliation) - smart contracts which allow for trustless swapping of tokens. The concept is genius and the execution here seems very good (to me, non cryptographer) but, again, what can I do with these tokens or coins I've traded except trade them later for some other token or coin?

BCHBull seems to allow exposure to commodities and some fiat currencies - that makes it comparable I suppose to actual currency or commodity speculation which has been going on for centuries. One might still argue "what can I do with all this gold except trade it later for oil?" but, well, that seems to be a weaker criticism.

Agreed, but unironically. US tobacco consumption is at a historic low, while people are dying from an opioid epidemic and fentanyl contamination, and somehow the War on Drugs is nearly unquestioned as good policy? Prosecuting people for making poor health choices is such an extreme and frankly insane idea.

Let's go back to selling Bayer Heroin™ at pharmacies, with sensible regulations. That would better position us to minimize narcotic use over the long term, while also making it safer, and defunding the cartels while we're at it. In the meantime, if someone is going to do drugs, I'm all for them using cryptocurrency to make the process as safe as it can be given the circumstances.

The actual market value of diamonds is pretty low. You can pay a jeweler a lot of money for a shiny diamond, but good luck reselling it for a similar amount of money.

Gold, OTOH, is fungible. You can melt it, mold it into different shapes bars, resell it, etc.

With diamond jewelry, you pay mostly for the manual work of jeweler since folks don't go to jewelry shops to buy a diamond stone alone. If we talk about gold bars, no sophisticated manual work involved, just pouring molten gold into some mold on semi-industrial automated scale.

If you buy sophisticated golden jewelry, you also pay ton for work that nobody else may appreciate. Sure you can get it smelted into something else, but you burn most of the original value, and some more on the change itself.

Diamond value went through the window already (as it should), if gold came down to use value, we'd see it used more for electronics and electrochemistry.

I mean, this is all true which is why we have fiat currencies.

The UK government has consistently honoured debt for longer then the US has existed, for example.

Inflation, and especially controlled inflation, is much easier with fiat money. Most governments see it as an extremely valuable tool.

> A friend argued to me that crypto is "A Terrible Thing" because its just used to fuel the (illegal) narcotics industry.

My general argument against this is that Ransomware _predates_ Crypto.

There's also the whole Regan airlifted Iran literal USD for helping him win a presidential election so you don't need crypto for scummy behavior.

That's true of everything we use as money, including precious metals. You can't eat them, live in them, use them as weapons, walk down the street in them. They have value bacause we all agree that they do and we all agree to use them as a means to exchange that value. Also, and this is important and I should have said it first, they have value because their supply is restricted.

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.

> That's true of everything we use as money, including precious metals.

To exploit this chance for quote Terry Pratchett, on a book that does happen to be about currency and banking:

> ‘The world is full of things worth more than gold. But we dig the damn stuff up and then bury it in a different hole. Where’s the sense in that? What are we, magpies? Is it all about the gleam? Good heavens, potatoes are worth more than gold!’

> ‘Surely not!’

> ‘If you were shipwrecked on a desert island, what would you prefer, a bag of potatoes or a bag of gold?’

> ‘Yes, but a desert island isn’t [the city of] Ankh-Morpork!’

> ‘And that proves gold is only valuable because we agree it is, right? It’s just a dream. But a potato is always worth a potato, anywhere. A knob of butter and a pinch of salt and you’ve got a meal, anywhere. Bury gold in the ground and you’ll be worrying about thieves for ever. Bury a potato and in due season you could be looking at a dividend of a thousand per cent.’

-- Making Money by Terry Pratchett

Government fiat currencies have fundamental value because their taxes are denominated in their fiat currency, while their fiat currency is used to compensate the public sector for their labor. If you, as a private citizen, want to avoid the consequences of not paying your taxes (e.g. prison), you best find a way to get your hands on some of the fiat currency that has entered the economy via the public sector workers.

For a cryptocoin to have fundamental value, someone must be willing to accept it as payment. The only entities willing to do so currently are criminal enterprises and perhaps the El Salvadoran government (to pay taxes). All the other uses (like cross-border payments) rely on speculators on both ends providing liquidity for the exchange to fiat currency.

It's mostly correct except it's just the governments that agree to take gold and silver to settle debts (no, going off "gold standard" did not change this, gold and silver are still accepted as bank reserves around the world). And governments have the power to take your property to settle your debts with them. So for anyone, who is a subject of a government assigned debt (via taxation usually), gold has very practical value as it allows to keep one's property.

The same is not generally true for crypto, perhaps in El Salvador they really take crypto to settle taxes but in any other country crypto only has value because of speculators.

> the governments that agree to take gold and silver to settle debts (no, going off "gold standard" did not change this, gold and silver are still accepted as bank reserves around the world)

Really? Can you point us, or perhaps just me, to something that explains that and which countries this applies to? I think that I'd have a hard time paying the Norwegian tax authorities with gold or silver. In fact even paying them in cash would be difficult.

>Can you point us, or perhaps just me, to something that explains that and which countries this applies to?

Gladly https://www.efginternational.com/us/insights/2021/gold-and-b...

>I think that I'd have a hard time paying the Norwegian tax authorities with gold or silver.

This might be even true since Norway is not in EU but I would be surprised if Norwegian banking had been that different from Basel system.

What are you talking about? We can wear gold, make weapons out of iron, cups out of copper… coins have both a fiat face value and real tangible value (the “floor”).

Bitcoin has no intrinsic value. It’s entirely belief.

That’s not a bad thing. MLMs can be very profitable, some turn into multi-generational institutions of faith.

I own bitcoin because it’s like buying a share of the Mormon church early on. Absolutely, do it! But comparing it with gold? Come on, be real.

[flagged]

Bitcoin physical value is that, one way or the other, billions of humans got atoms in their brains, arrange in such a way that they recognize bitcoins, and have a certain understanding of it's setup... this is a lot of atoms, and is no small fit.

You're describing the belief value.

And fiat currency isn't purely about perception of value?

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.

If nothing else, when the time to pay tax comes, you'll find yourself in need of some fiat if you want to stay out of the trouble.

> And fiat currency isn't purely about perception of value?

Of course not. I don't know the laws of the country you live in, but in the US, the dollar is always acceptable as the payment of a court judgement and for the payment of taxes. That's not perception of value, that's value.

All money is just IOUs, but getting an IOU from your landlord is different than getting an IOU from a stranger. You will have to pay your landlord in the future, or the landlord will send someone to physically throw you into the streets, and might be given license from the government to just take arbitrary possessions from you. An IOU from the landlord will automatically offset that.

When you get IOUs from entities you don't have a ongoing financial relationship with, you need buyers who either 1) have an ongoing relationship with or are willing and able to transact with that entity, or 2) trust that they can find someone who has a relationship with that entity who will buy the IOU.

1) is value, 2) is the perception of value. Crypto has 3), in which there is no entity issuing or accepting the currency against a real debt (such as taxes or legal liabilities, which if not paid result in men in uniform hitting you with sticks, chaining you up, and locking you in a room), and no place to dump the currency other than other speculators.

You can find people who believe in bitcoin, so bitcoin is liquid. But bitcoin support relies on a constant and enormous amount of marketing and lobbying, in the exact same way as "hawktwa." Crypto (thus far) only has value in that it can aid in criminal transactions (semi-privacy), and that enough wealthy people own it that they're now convincing weak governments to subsidize it. Dodging law enforcement and government handouts to the wealthy on one hand; maintaining preexisting legal obligations and paying taxes already owed on the other. Both fiat and crypto rely on government, but crypto is government subverting itself. Crypto only has value to the degree that governments allow or encourage lawbreaking and corruption. Crypto (as it is, not a hypothetically) is parasitic.

> Zimbabwean dollar isn't remotely like the Swiss frank

The Zim dollar is exactly like the Swiss franc, except it's harder to find people who pay Zim taxes and court judgements than people who pay Swiss taxes and court judgements. Just as hawktwa is exactly like bitcoin, except they lack the lobbyists, and the marketing is focused around a viral youtube clip. The big difference between the two classes is that you don't have to be convinced that government fiat is worth something, you know it is. The reach of crypto, outside of fraud and government graft (which is real value) is simply the reach of crypto marketing.

> The reach of crypto, outside of fraud and government graft (which is real value) is simply the reach of crypto marketing.

Except when your government is not trustable and you have to find a way to store and transfer value in an independent and anonymous way.

The tricky part is there is a difference between "your government is not trustable" and "you don't trust your government" that you can never bridge.

Why does it matter here?

Moving your money into a non-local currency or store-of-value has a cost and its own risks.

If you trust an untrustable government, you lose when they betray you. If you don't trust a trustable government, you lose when you spend years and decades hedging against their betrayal and it never comes.

This is all true. The point is that a cryptocurrency gives you a choice, which you otherwise don't have, so it's useful.

> It’s purely about perception of value

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”.

No.

Fiat is backed by tax base. US has more assets than debt. Additionally US is the largest economy in the world, how much would the right to tax it be worth? A lot.

It's not at all just perception and influence as you claim.

US economy has been second largest for over 10 years now [1].

[1] https://ourworldindata.org/grapher/gdp-maddison-project-data...

Huh, the paper cites World Bank, but WB themselves report differently:

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD

Any other official sources would tell you that US is the largest economy in the world by GDP, which is the most commonly accepted metric.

I don't know where that site is pulling their data from, but not even the Chinese government claims their GDP is as high as that. And our GDP is higher than that site claims

This is Purchase Power Parity GDP (as indicated by the subtitle "This data is adjusted for inflation and differences in the cost of living between countries.")

> Fiat is backed by tax base.

The general form of this is, it's backed by something that will accept it as payment. But then the same is true of non-fiat currencies.

The value of a currency is simply, what can you get when you spend it?

So hyperinflation only happens when the tax base disappears? Perception and influence is clearly part of the picture.

It’s one of the core attributes. Zimbabwe wasn’t going to be raising a trillion dollars of revenue.

> That’s the thing I can’t ever come to understand about crypto. It’s purely about perception of value.

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.

> At least with some precious metal, it has a floor value as a function of its practical uses and abundance.

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?

There’s at most a zero floor value on holdings of government debt, corporate equities, bank holdings, and any asset held by a custodian.

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.

In this specific case its also about buying access, so I doubt he'll rug pull, he can just direct the access requests to buy something.

Precious metal floor value is not immune either, since (1) it is dependent on supply and (2) specific technologies/industries that require their use may become diminished or obsoleted. Definitely a lot less volatile than something not bound by reality though.

The legal landscape forced the industry to be purely financial. Hopefully this changes soon.

Are you proposing that "value" is meaningful in the absence of some perceiver? All value is the perception of value. The only difference is that it's easier to find people who value precious metals, but that sort of thing always depends on where you look. One can easily imagine situations where a position at the front of a queue is more valuable to the people nearby than a gold coin. Finding value in a blockchain is no different.

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.

> Are you proposing that "value" is meaningful in the absence of some perceiver

Yes.

Gold conducts electricity.

Bitcoin has no physically useful properties. However, I will admit a public ledger is actually probably very good for the USA so we can see all the grifting easily.

Nobody cared that gold conducted electricity until very recently in human history.

The American dollar is also about perception of value, but via a maze of interlocking attributes that make it slow to move.

A new fiat currency without a state sponsor is fragile by comparison. Always will be.

But it isn’t just the military and the taxes, it is the labor of all the people who are willing to work for US dollars that give it value. While the majority of people paid in dollars are hard working and generally honest, it seems that the majority of people paid in cryptocurrencies are scammers or criminals in one way or the other, or else financial operators. So till more people are getting paid in bitcoin or whatever I don’t see why anyone will find it something other than a speculative asset for dollar owners.

Agreed.

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.

You're mixing up a bit everything. Bitcoin is totally different from Ethereum or Solana and these 2 networks are different from all the NFTs and meme coins launched on these Ethereum and Solana.

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

It’s not illegal for a celebrity to launch a meme coin or collectible. It’s not as clear if the President and his direct family can do the same.

Anti-bribery/corruption is the concern with the coins (just as it was with his hotels in the first administration). Not the legality of the coin.

But it’s moot, this admin has decided that norms don’t constrain it and it will not allow investigations into itself. So it’s de facto legal.

There are pros and cons of cryptocurrencies as money, just like gold, which cause people to speculate on the price.

What are the pros of the trump coin or the melania coin?

A brainwashed group of drones that are willling to pay money for it.

But I'm convinced most people that buy memecoins like that are thinking that there's other suckers that will buy it and make the price go up.

There is brand value in Trump.

Trump is the largest meme on this planet.

What should be the fair value of his fan coin?

Zero in 4 years’ time.

it's a ... memecoin - a category of crypto assets.

It’s a funnel for foreign bribes. That’s literally the only utility of these Trump coins.

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Are we really free not to be part of it ?

This administration is also creating a sovereign wealth fund, which trump will exercise significant control over, I would be shocked if crypto and his coins specifically are not included.

We are paying for it all one way or another, either with taxes or more likely higher inflation.

You and I are free to not buy it, but that doesn't mean Russia or b Saudi's or China or Zuckerberg isn't going to buy a bunch to influence our president

Rather than regulate crypto, it might have been better to not elect him in the first place.

Trust me, I'd be a lot happier if that had happened.

A sitting president profiting off the presidency is a hall mark of a corrupt state. Doing it so openly suggests there's nothing stopping from doing so in much subtler ways too.

Doing it openly demonstrates that he thinks a lot of people (namely, people who voted for him) won't have any problem with it. In that case a corrupt state is not the biggest problem.

Everyone has the power to create credit out of thin air.

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.

Thank you, this is something I think people really misunderstand about "money" in our system. Every time I create a "loan" for a family member I've technically created (i.e. debt) I've done the equivalent as to what a bank does to create "money". The question becomes if I can take the IOU I have from my brother, and trade that to another individual when I need to acquire goods.

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).

Getting a banking license in the US at least is totally doable and lots of banks are created de novo every year.

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.

There used to actually be lots of new banks, now there are some: https://www.statista.com/statistics/193052/change-in-number-...

Huh, from about 150/yr from 2000-2008, not one from 2011-2016, 10/yr 2017-2023. Interesting.

Can your corner store credit be used to pay taxes? How long will your corner store survive if the IRS found out you were processing transactions in your own currency?

No to paying taxes, mostly because the asset you'd have is an apple... The corner store at least has a receivable, but the IRS still won't accept that from them.

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.

>How long will your corner store survive if the IRS found out you were processing transactions in your own currency?

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...

You didn’t say currency, you said credit. But it doesn’t matter, lots of non-US chartered institutions historically create US dollars. There are some treaties around it now but in the beginning English banks created the Eurodollar system with no control by the US government.

Everyone has their own opinion of "lots" I suppose, but the quickest info I could come by in a quick search was 8 de novo created in 2021.

Yup it's in the ~10's every year more or less.

Sure, but because of fintech not as many need to get created. Fintech has made it relatively easy for new entrants to work with partner banks through BaaS platforms.

Buying an iPhone on credit is not making money out of thin air. Unless you can fractional-reserve create iPhones.

Sure it is. In fact, it's fractional banking where the fraction is 0.

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.

Ok, what am I misunderstanding here?

If I need financing of 100 pesos for buying a house, and I go to a commercial bank which has a 10% fractional reserve requirement, they'll give me 100 pesos, 90 of which will be newly created broad money. As I buy the house, and pay the 100 pesos to the seller, the 90 newly created pesos just entered the economy.

If I go to your corner store and buy an Iphone on credit, you're not getting any new pesos right away, and neither am I. I could turn around, and sell the Iphone to someone, but again, that person will pay me with pesos that already exist in the system.

You could argue that implicitly me wanting to buy an Iphone means that someone somewhere down the line would've used a commercial bank to take a loan and hence my activity indirectly participates in broad money creation. But that doesn't mean that buying an iPhone in a corner store on credit is exactly equivalent to taking out a loan at a commercial bank when it comes to broad money creation.

Continue down the chain on your house example. Imagine in each case instead of transferring money in bank accounts, people do the work on credit. Add up all the credit at the end of the chain. Then go back and add up all the bank account balances in the "pay with money transfer". It'll be the same (except for the fraction). Now, go look at a bunch of public company balance sheets - you'll see payables and receivables all the way down from mining companies to retailers. One long chain of credit. They could have all borrowed money from banks instead and have zero trade receivables throughout the entire chain.

The point of "money creation" is to enable economic activity. Credit does the same thing. In fact, your "money" at the bank is just a receivable from the bank. Ray Dalio has a quarter decent explanation of it here: https://youtu.be/PHe0bXAIuk0

I see. You use "money" in a kind of a metaphysical 'total value' sense. That's fine, but very confusing when talking about "money creation", because that term typically means the particular mechanism by which units of a particular currency come into existence. In particular, M2 money growth, and where that line comes from.

You're right when you say that it's all debt all the way down, but you're very much wrong if you really believe that new fiat units appear in the system just because you took a loan at a non-bank entity.

EDIT: To illustrate my point a bit.

Let's assume that there are no fractional reserve banks, and only cash exists as a form of money. Only government issues cash, in total 10k USD have been issued, and the next issuance will be in 2 years.

Let's say you need 10 USD, and I have a 10 USD banknote. The banknote is debt money in the sense that it's a direct liability on the central bank balance sheet. For me it's a 10 USD worth asset.

Now we sign an agreement that you're going to pay back 11 USD in a year. I give you my banknote. Now I have exchanged one asset (a 10 USD bank note) for another asset (your promise to pay back 11 USD in a year). Depending on your character, history, and point in time between now and in a year my new asset is worth between 0 - 11 USD.

Let's assume you have stellar character, and are a well respected member of the community who always pays their bills. It's likely my new asset is now worth 10.5 USD, and someone would be willing to buy your debt from me.

By issuing a loan to you, we haven't created additional 50 cents in the system. The system only has 10k in it, and the next issuance is in 2 years. Anyone who would be willing to buy your debt from me would need to already have 10.5 USD.

Now the government decides that fractional reserve banking is pretty nifty, and is made legal. The fractional reserve requirement is set at 10%.

A neobank that has 3 USD cash (central bank liability) in their vaults approaches me and buys your debt from me by opening a 10.5 USD deposit in my name. Now the bank has a liability of 10.5 USD (my deposit), a 3 USD asset (cash), and an asset worth approximately 10.5 USD (your debt).

Congratulations, we have now all together created 7.5 USD of additional money in the system. The theoretical M2 money maximum in our system is now 100k USD. How much is actually in circulation depends on how much debt people are taking on. At the moment we're the only ones having done this, so amount of M2 money in the system is 10 007.5 USD.

M1 (and thus M2) money includes checking accounts - a checking account is literally credit. You have lent the bank money and you have a receivable.

I never said "fiat" - you seem to be conflating things. In my example you call out "no new fiat" (which is true) and in your example you say "more M2!"(which is true). Make a valid comparison. The best way is by comparing the total assets and liabilities in the system and the total amount of economic activity driven by those.

In the end, a receivable is a receivable. The only difference is that we've created a very neat system to trade bank receivables, and tend to call them "money". When you hear someone say "money was created" mentally translate it to "receivables were created". "M1", "M2", "fractional" etc make it all sound so sophisticated when it's just ideas from 100,000 years ago, and you and I can create receivables too.

>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.

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.

Yeah, that "banking cabal" includes a heap of checks and balances that at least on paper stop financial crimes like scams, money laundering, market manipulation, insider trading, and they add guarantees like the relative stability of value, interest rates, and compensation if your bank does end up going bankrupt.

You get none of those protections with cryptocurrency, which is exactly what scammers, criminal organizations, and financial libertarians want.

You don't need a bank to create money out of thin air and creating a bank won't allow you to do that.

I can create money out of thin air with you, if you are willing to accept my credit worthiness.

> and no upstart fintech company has this power

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.

> mega banks have the sole power of creating credit out of thin air

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.

Take the next step. What happens when the borrower spends the money and the place they spend it banks with different bank?

What's amazing is that more people don't think this through. They just take the "thin air" story and that's it.

Alice gets a 400k mortgage at bank A, so she gets 400k in credit at her (new?) account at the bank. Alice then pays to Bob for the house by transfering the 400k to Bob's account at bank B. No real money or gold is moved. Alice owes bank A 400k with money slave interest rate (e.g. 7%), bank A owes bank B 400k + interbank interest rate (e.g. 4%), and bank B owes Bob 400k (but they phrase it as "he has credit").

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.

> No real money or gold is moved.

Money is moved; this is the problem with your analysis, see page 19 of the infamous Bank of England's "How Money is Created" paper [1].

[1]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

You missed an important bit... the banks (A & B) accounts at the federal reserve are updated (bank A down, bank B up) for the transfer. And that's where the rubber meets the road. If bank A doesn't have the assets, it all stops. Banks don't just give each other endless credit to solve payments...

There is no magic in banking. If you describe something and it sounds magical, a piece is missing. If you were running bank B, you'd never agree to what you described. You'd want the assets, or you'd want some kind of collateral even if you were willing to do an interbank credit, you'd limit it, you'd do all kinds of credit analysis on your bank counterparties... And what I just described is how trading of securities tends to work between banks. But even then, it's not how payments are solved...

If you count the loan as an asset, surely you have to count it as a liability for the borrower. And the bank has to actually give the money, so they're down that money.

In the end both are net zero.

It's not net zero because you collect all the interest on money you didn't have to begin with and created out of thin air via an accounting trick.

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.

The transaction is balanced in isolation, but the initial part (actually giving the money) is allowed to be negative for the bank as long as they're within their leverage ratio.

So yes, as a whole the bank gives money from thin air.

You can't do this indefinitely. There a lot of risk management rules and capital requirement ratios which dictate how much money you can make of "the thin air". Also you should have enough liquidity to let the customer transfer the borrowed amount outside to actually use it.

i thought the central bank does this?

It goes up the chain to the central bank.

> the mega banks have the sole power of creating credit out of thin air

Every bank does that. The US has more than 4,000 of them.

I remember reading about Monzo bank in the UK a lot some 5 years ago. I’m curious how they are doing these days. Seems like they’re still operating?

They're doing quite well it seems. Everyone I know seems to have an account with them.

They've had a full, unrestricted bank licence since 2017 and have over 9.3m customers[1].

[1] https://en.m.wikipedia.org/wiki/Monzo

I used them during their beta phase and they were my primary bank until I left the UK. Exceptional service, and the only app from a UK bank that wouldn’t have made you want to cry with how awful it was.

Crypto has never posed a credible threat to any aspect of the establishment, and it never will. Need proof? You don't have to go through an arduous screening process to acquire and deploy compute. The finance industry saw a pool of dumb money forming and predictably decided they'd like a slice of the action.

> an arduous screening process to acquire and deploy compute

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.

> there is more unlikely than crypto becoming a credible threat to the banking establishment

Follow the money: Wall Street loves and lobbies for crypto.

lol what

If there isn’t sufficient competition for commercial banks, I think they should just be regulated as privately owned utilities for the public good or just be made into a public agency. What is the point of outsourcing this service to private industry if there is no working market dynamic?

Exactly. Bankers are modern-day royalty. Banks are granted special, exclusive powers by the state to issue/counterfeit the nation's currency as loans. Banking executives are anointed by decree.

The idea of 'disrupting banks' is gaslighting because it pretends that they operate within a 'free market'.

in brazil and india, american backed "fintech" could create credit like you descibe, plus none of the pesky revenue reporting required fom banks.

Tether appear to have created a huge amount of USD out of thin air.

Best not to pay much attention to Andreesen though.

On this point, I too have a really difficult time understanding how there is supposedly >$50 billion in treasury bonds backing Tether USDC sitting at Cantor Fitzgerald. It really does seem like the bonds backing tether just came out of thin air, unless tether was sponsored by an entity that gave them the wherewithal to obtain the bonds, for the sole purpose of moving money without KYC with tether.

100% - even a few years ago, Tether claimed that they were receiving USD deposits approaching $5B per week. That amount of income is at the Saudi Aramco and others level.

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...

Crypto fans and gold bugs miss a very important point - if their favourite currency were to get big, banks would hold it as an asset, and issue loans in exactly the same way as any other currency.

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?

ah...I don't miss the shockingly willful ignorance of the crypto boom days. Go try your conspiracy nonsense on reddit and leave us be.

In South Africa the "big" (historically incumbent) banks were indeed disrupted by a "startup" bank relatively recently (in the last 20 years) - and this startup bank went on to in turn become one of the big banks.

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...

What did they do to "disrupt" the others?

I don’t think disrupting banks is even possible. The time, money, and energy required is simply not realistic. There’s so many disrupt-able industries out there and I’m not even sure banking is the most beneficial one to tackle.

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.

They've "lost" a few times by now. Government has propped them up.

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.

I guess that’s my argument as to why it’s not losing.

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.

Not all of them were on the loosing side of that situation JPM had sold off most of risky mortgages in prior years taking a sizable haircut while other banks were supposedly raking it in. There was a ton of pressure on Jamie Dimon not to do it because JPM numbers looked bad compared to peers in those years.

JP Morgan Chase and Wells Fargo would have been fine in '08 had they been left alone.

Right. Banks are boring. The whole industry is based on very simple math. Nothing much to disrupt.

> don’t think disrupting banks is even possible

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.

The government is very conservative in handing out banking licenses.

There was a famous scandal with an Icelandic bank that was disrupting the market with higher interest rates.

It is basically impossible to license a new bank in Germany and the financial regulations have become stricter over time, with a full banking license being mandatory for more and more things. It's kind of disturbing.

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?

N26 did it but creating a new bank attracts money launderers and scammers. The legal department costs are infeasible and half a century-old systems are not easy to adapt to new banking concepts. The government and regulation side of the system needs serious improvements in Germany to bring them to 21st century first. However, there is little economic incentive to do so. With an aging population and deeply conservative culture, there is little political incentive to improve any infrastructure. The current governing parties will probably lose the election next month because they made costly infrastructure fixes.

> The current governing parties will probably lose the election next month because they made costly infrastructure fixes.

Germany is heading / has bet on a completely different direction than actual real world out there is moving to. The unability to admit massive failures and adapt is glaringly obvious even from outside, and literally fucks up whole EU left and right. Germany and its population has tremendous potential, we all know it, yet it looks like headless chicken running around yard with no positive future that I can see.

I don't care who will rule there, nobody outside understands nor cares about detailed internals of Germany. But, for a change, please put there somebody competent who can steer country and a bit whole continent as a consequence, has respect of peers and adversaries and can do necessary changes to keep it all afloat. Current and past leadership was and is... don't have a nice name, so better not describe it. Massive damage across whole EU. Weak EU then invites dictators to try to test its strength.

But you don't necessarily need a banking license, right? My understanding is that there's a handful of bank-as-a-service banks that have a license and will let you do your thing.

I'm sure the aging population doesn't help, but to me the primary inertia comes from how difficult it is to switch. You can take your phone number with you while changing providers, you can't do that with your bank account. They have "services" that are supposed to handle that, but having dealt with their investment arms and moving a broker account from one bank to another, I wouldn't trust them to not mess it up, and suddenly my rent isn't getting paid. So I'd have to do it myself, which will make me deal with lots of stupid systems and processes and cost a hours upon hours. I'd need to save 100% of my banking fees (which are way too high) for a decade or two to make that worthwhile.

Make switching banks as easy as switching phone providers and you'll get some competition going.

To be honest, in Germany even the brick and mortar banks provide transfer services. They will detect and move your automatic payments. You usually fill a form, login to each bank and they send automatic requests to move stuff. Similarly my broker also supports moving accounts for me.

Moreover, especially after the Wirecard scandal, I wouldn't trust any company that doesn't have a banking license. Without a banking license they can nuke my entire account and I will be the only responsible idiot for that.

Btw, the US system is exploitative and decades behind what the worst European countries have. NFC payments became a thing after Apple brought them to the US. Europeans, heck, Middle Eastern countries were already using NFC EMV payments for 5 years by then. The technologically best and most trustworthy banks are usually from Northwestern Europe so look for Nordics and the Netherlands, if you would like to see a modern but not totally exploitative banking looks like.

There comes a point where a reverse merger makes more sense. You want to be a bank? Buy one. You want to be a “different” bank? Buy one that’s at a tipping point and make your agent of change pitch.

>here’s so many disrupt-able industries out there

If you could name a couple that you think stand out more usefully than banking, i'm curious.

Isn't that usually indicative of a winner-takes-all sector running on pretty thin margins?

all empires eventually fall

And when they do, the banks and “innovation” are the least of anyone’s concerns.

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.

When the USA doesn’t stand you can go to China for the banking.

They might not be disrupting them, but they are definitely causing competition in the market place again.

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).

That exactly. Fintech forced Financial Institutions into Digital Transformation. Now they have caught up, there is no "next big thing" for Fintech. Crypto might have been it, but it killed itself by terrible UI and a never ending stream of scams and frauds. I believe there is an AI Agent Internet of Money to end Ad Revenue, but haven't found the arbitrage model yet.

Halifax is owned by Lloyds banking group, and their current app is just the exact same Lloyds app with a different logo. I know because I bank with both and the apps are identical.

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.

Yeah I feel like Monzo and Starling really forced the high street banks to level up their game. A friend of mine was a PM on an app at one of the big high street banks and they said the instruction from the top was explicitly to be like Monzo, and they did iterate, get better at app development, and ship a bunch of features that people like (spending notifications, in app card freezing, etc).

Interesting... We've had scanned check deposits at Chase (US) for at least 15 years, I think.

Bear in mind that's a measure of how backwards US banking is, not how advanced.

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.

Cheque use in the UK is now around two per year per person. (This includes business-to-business cheques.)

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.

I get a couple of cheques a year from family in the UK. It's an infrequent transaction but an important one, and cheque scanning is actually the only reason I maintain my legacy bank account.

most countries abandoned checks at least 15 years...

ppl dowvoting facts now

US banks are weird [1]. Archaic. Slow. Filthy rich. Incompetent. And yet they're nearly impossible to disrupt due to the benefit of size. Starting a new bank is expensive, unless you want to pretend at being a real bank and letting another bank handling all of the nitty-gritty details. In which case you've now become a reseller of that bank, and will likely be even worse.

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.

What about Japanese banks? They have a reputation of being terrible, justified for the little experience I had with them.

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.

How are they incompetent? My boring old bank has never lost my money, it sends out bill payments on time. Those are the main things I ask for it to do, and it has done them competently for decades.

As far as I can see, none of the fintech/web3/crypto-nonsense companies can be trusted to do those things well.

How do you know it’s never lost your money? Do you audit each transaction on your statements?

I would hope so. I certainly do. In 25 years of using them, I have never had a conventionally regulated financial institution (NCUA-insured credit union, FDIC-insured bank) lose so much as a penny. Whether they are keeping proper reserves is another question entirely, but also not really my problem (NCUA and FDIC exist for a reason).

I don’t see what more US banks could do. I have been transferring money instantly to people online for over a decade for free. They have websites/apps, I can withdraw paper money around the world, what other utility could a “bank” provide me?

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.

Pay interest. They charge you 400bps to hold your money it’s outrageous

US banks do pay interest. If you're not earning at least US federal funds rate minus ~50bps, that's on you for not choosing to spend 5 min to open a bank account.

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.

Could banking customers moving their business to Credit Unions be disruptive? I know nothing about this space, by the way.

They suck, pay no interest and charge the same high fees. The best alternative is investment brokerage cash accounts. They pay interest, allow you to buy short term treasuries with savings and provide checking/debt cards

And trust. Fintech in the US has had a bunch of spectacular implosions and scams.

I don’t know if it counts as disruption exchanging one behemoth for another but my life got a lot better when I started using a Fidelity cash management account as my bank.

That doesn't have the same protections (at least FDIC) as a standard checking or savings account, correct?

No it doesn’t. But I would never keep large sums of money uninvested in the market and in a CMA anyway.

https://www.fidelity.com/spend-save/fidelity-cash-management...

Here in Norway new, innovative, and successful banks have been...wait for it...acquired by the big old banks. Then the enshittification starts.

Then customers scramble to find a replacement, which opens up the door to a new exciting bank, and history repeats.

Have you found a replacement for SBanken?

Banks are the most immune to disruption, because they function so closely with government, and they are nothing without the blessing of government. And the hurdles to create your own bank are very high. Check out this great Netflix documentary "Bank of Dave": A moderately successful businessman decided to start his own bank, just to see if it could be done (and to lower fees for his local community). The results are... pretty much what you'd expect. "You can't start a bank... nobody starts a BANK!" (They just kinda... have always existed!)

It depends of the services the bank offers, because there are plenty of smaller regulated banks with deposit protection that offer savings accounts in the UK. I assume running a current account has a lot more regulatory requirements than savings?

UK specific maybe? ~10 banks get started every year in the US, there are ~5000 US banks.

I think Evolve/Synapse and the fog surrounding the responsible parties, along with complete radio silence on persons responsible (almost as if newsmedia has been given a gag order) has completely kneecapped bank competition for a half-decade at least.

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...

I believe a genuine way to address this problem is through the creation of financial sandboxes [1]: controlled environments where regulations are relaxed to promote innovation at a certain scale.

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

What isn’t the bank doing for me that is in need of “disruption”?

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.

In the $5k-$10k savings range, you can also average 4.5% just by switching banks every year and taking advantage of sign-up bonuses. With a spouse and the referral bonus, the break-even cap goes up to $15k-$30k. Everything is FDIC-insured the whole time.

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.

Banking already has been disrupted too.

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.

I love HYSA, I made a sizable chunk on the interest and switching banks for the best rate is normally only a few steps. Right now I'm moving my savings from One Finance (3.75%) to Barclay (4.25%) because One dropped their rates (from 4.5% IIRC) and I'll make ~$40 more a month from the switch. It's not a ton of money but it's not nothing and it's dead simple for me to move the money.

> What isn’t the bank doing for me that is in need of “disruption”?

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

What type of transactions do you need to make outside of business hours that you can’t do electronically?

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

if i transfer money from one bank's account to another, it takes minimum of 48 hours if I make the request before 3pm cutoff time. Day 1, the transfer request is made at 1pm. Day 2, the money is no longer available in the sending account yet not in the receiving account. Day 3, the money is available in the receiving account. If I do it after 3pm, the request is not placed until Day 2. Why? WTF does a computer have a cutoff time? Does it go home and cook dinner for the family and do homework with the kids?

>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.

Wait for FedNow to get rolled out. That is the Federal Reserve's instant payment system. It does need to be implemented by banks cause it is just an API. One nice feature is that it has push model, pulling money means making request that can be approved which should increase the security.

The problem with pushing payments is that the cost of fraud falls on the payer. In the pull model, if the payer says it was unauthorized, the rules favor the payer--restoring the payer account happens as a matter of course, and disputes are handled subsequently. This sucks for the payee, but they're usually businesses who are more sophisticated and better placed to handle these issues. But in the push model, the presumption is the payment was intended by the payer. It's a wholly reasonable presumption assuming sophisticated, rational agents. But we're talking rolling out push payment systems where the payer will be your elderly grandmother.

It won't be pretty unless there are some aggressive changes to existing regulatory and legal frameworks. But it's not easy to figure out to protect consumers in push payment systems without opening gaps where fraudsters can directly abuse the system, like checking kiting scams of old. (Checks are a pull payment type of system, but the important point is that the cost of check fraud--forged, kiting, etc--fell primarily on banks and merchants, and less on individual grandmas who couldn't buy food because they were stuck in a months-long battle with the bank to recover funds.)

Pulling fraud with ACH is pretty rare. All the scammers trick people into sending them money, or take over account and send it, this is more common with phones and Zelle. The latter would be handled with current system. The former isn't handled with current system, and would be helped if there was way to reject transfers to help with return money scams.

There is danger that people will send money on bogus requests, but invoice fraud is already covered. Other countries have the same model of sharing account number widely and it works.

> There is danger that people will send money on bogus requests

It's a huge danger. This is why there are so many Bitcoin ATMs in convenience stores. Scammers call vulnerable people and induce them to send them Bitcoin. The number of people who you can convince to withdraw hard currency from their bank and feed it into a Bitcoin machine on the request of their "sick nephew" or "Microsoft Security Team" is mind blowing. Even elderly former police and attorneys do this.

Push payments make it much, much easier--now it's just a click away. The risk is higher for the scammer and it's easier to trace as compared to Bitcoin transfers. But it will be an endless game of whack-a-mole, and because the losses won't primarily fall on banks, payment networks, or other least code avoiders (unlike with credit cards--especially--or other forms of pull payment in general), there's less direct economic incentive to do prevention. We'll likely end up with more centralized, government policing, which will be far less effective and generate more political friction.

Push payments are the future. They're already ubiquitous in many other countries. But while it will streamline day-to-day transactions, there are going to be many more victims of fraud left holding the bag. And you can see this in Europe, where push payment fraud is rapidly expanding.

And even if, in nominal dollar amount, total push fraud ended up equivalent to pull (e.g. credit card) fraud, the social cost is greater as you end up with a small number of people bearing all the costs, whereas with pull fraud the costs are effectively spread across society in the form of slightly higher transaction costs and goods & services prices. There's no built-in transfer mechanism (i.e. tax) like that in push fraud because the incentive and accountability structure is radically different, notwithstanding that in the abstract it's a very simple change in who is considered the initiator of a payment.

Zelle is run by the banks and transfers are instant and free.

https://www.zellepay.com/faq/how-long-does-it-take-receive-m...

Zelle has a limit on the amount I can transfer, especially for new contacts. And it is precisely new contacts where I need to make a big payment, latest example being the contractor to remodeled my kitchen and didn't want credit card payment for some reason.

> didn't want credit card payment for some reason.

i'm guessing 3.5%+ is the some reason

Tradesmen who are allergic to credit cards are always avoiding tax, period.

The proper response is to ask for the cash price.

Exactly this. Paying 3% more for credit card vs cash is a wash for me. I get 2x back by charging it to my Amex Blue Business Plus, those 2x points are easily worth more than 3% when transferring to an airline.

[flagged]

You’re right, these are the only banks that support Zelle

https://www.zellepay.com/get-started

i hope you get paid for all of your shilling

You just can’t admit you are wrong can you? Zelle is free, supported by almost every bank in the US - I’m sure you will find one obscure credit union in East MiddleOfNowhere South Dakota who doesn’t support it - and it’s instant

you can't just admit you don't know wtf you are talking about

checks are a valid form of payment. if you receive one you have to be able to deal with it. some checks are too large for deposit via app. as someone else pointed out, zelle has limits that make sending large payments problematic. receiving a single check is much easier.

" supported by almost every bank in the US -" thanks for proving the point though

Yes, I’m sure you can find some obscure bank where it’s not supported, can you find at least 5 and tell me what percentage of people it affects?

I can’t think of one scenario where someone would be willing to take a large paper check in 2025.

You would actually accept a paper check from someone over $10K?

> I can’t think of one scenario where someone would be willing to take a large paper check in 2025.

You can't think very hard then?

> You would actually accept a paper check from someone over $10K?

yes. i have and will continue to do so. what, i'm going to say no to receiving money? after depositing that check, only a fraction of it was available the next day, with the remaining becoming available 3 or 4 days later.

Substantiate this "shill" comment. Who is this user employed by.

Zelle isn't run by the banks, it's operated by Early Warning and it's a scam service designed to harvest everyone's bank transaction history for intelligence gathering and fraud detection services

https://www.earlywarning.com/

An the Early Warning System is co-owned by 7 banks

https://www.floridatoday.com/story/news/2024/08/14/zelle-inv....

> Zelle is owned by Early Warning Services, a financial tech firm and consumer reporting agency that is co-owned by seven of the largest U.S. banks: Bank of America, Capital One, Chase, PNC, Truist, U.S. Bank and Wells Fargo,

Once you are part of the banking system, everything is tracked anyway

In Europe we have instant bank transfers, for free in Italy as of January 2025.

The bad thing is that they don't work outside business hours (not a huge problem), and that you can't cancel/revert it.

> if i transfer money from one bank's account to another, it takes minimum of 48 hours if I make the request before 3pm cutoff time

In the bulk of the free world these transfers are instant 24/7 - if I stay within the single banking brand I can do that internationally.

This is because of counter party risk with settlement. It is not hard to figure out. You just have no idea what you are talking about.

This implies someone can take deposits and issue loans in a "better" way, when the main feature of this type of business to customers is showing up with extremely low risk of losing deposits, not innovation.

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".

There are other banking models that are needed. Look into Custodia Bank’s model (SPDI). Full reserve system meant to backstop high risk (but legal) businesses. They went through a multi-year lawsuit around the start of 2020 with the fed who didn’t want them to exist, ultimately lost.

Custodia Bank marks the second enterprise in this thread that attempted to gain direct access to the Fed, bypassing intermediate banks, but was rebuffed. The other was Reserve Trust. Is it possible to obtain and make use of a Fed “Master account”?

China has seen its banks disrupted quite a bit more than over here with things like WeChat or AliPay. All daily transactions are done with them, and even small loans.

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.

Well, there was an attempt at it. There was a startup run by one of the best startup guys I've ever seen, Dave Wright, called Reserve Trust, which managed to actually get a fed account. I think some people in power caught wind of it, and it ended up with congressional testimonies and a lot of other problems before it basically got shut down.

seems like there was a conflict of interest where a fed high up helped them get a fed master account while also serving in the company’s board

https://www.bankingdive.com/news/kc-fed-has-revoked-reserve-...

The collapse of Synapse is a pretty good example of why people don't -- and shouldn't -- put their money in the hands of a "fintech startup". And while not a "startup", the collapse of SVB certainly doesn't help due to its close association with SV and by extension FinTech startups.

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.

I think you’re reaching far to connect dots here. SVB collapse has nothing to do with innovations related to fintech. Their issue was more of the typical run on the bank situation than anything to do with innovation. So it was a failure of the traditional banking model, which any bank is susceptible to

No one is providing a value proposition that would make me move away from [my large bank] when it comes to a basic checking account.

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.

In many cases the start-ups that disrupted entrenched big players did so by skirting the existing law and regulations the big players have to abide by and gaining market share before regulators could catch up to them.

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.

My company works in the healthcare space. I don’t know if we’re really “disrupting” as much as we are inventing new niches that were previously unoccupied, presumably because of the difficulties of dealing with regulators, working with electronic healthcare record (EHR) systems, and working with large, bureaucratic healthcare organizations like hospitals, insurance companies, pharmaceutical companies, and EHR providers. We’ve had a lot of success without dodging or stretching regulation (although we did work with regulators to create a new category of medical device: algorithms).

One problem with fintechs is that they are severely ad disadvantage when it comes to regulations.

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.

This. Regulation has been set so high on banks that it makes it extremely difficult for new players to compete.

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.

The big problem with amex/visa/mastercard is that it's a three sided market.

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.

I don't see how this is going to work.

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 cards that pay 2%+ are the premium cards that charge merchants 4%+. If you're competing against that rate, you could give a 4% cash back.

Those big merchant store cards are a likely path for how my scenario plays out. Imagine if a half dozen of those big merchant store cards merge, ditch their visa/mastercard pairing and provide an attractive path for other merchants to join.

I really don't get why it took so long for a bank to buy Discover.

It seems like such a good deal to get higher margin and then you could ultimately offer consumers better cashback or w/e rewards than a less vertically integrated card could.

> The real corruption/monopoly in financial services that needs addressing are the amex/visa/mastercard transaction fees.

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.

Every time I have any interaction with my bank accounts online, they seem to see it as an opportunity to try to cram paperless statements down my throat. Evidently they learned from the software industry that there's no such thing as "no", just "ask again later".

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.

From my vantage point, with accounts in both Canada and the US, the US market seems hard to disrupt because its financial sector is already highly competitive.

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")

The sad truth is most people don't have enough money in savings for 4% vs 0.5% to make a material difference. The B2B stuff is tougher to "disrupt", due to contractual agreements, regulatory overhead, etc. Also not as sexy.

I’ve seen plenty of attempts to disrupt the big banks that are quickly bought by the big banks if they develop traction.

You see the same with big tech.

To get real disruption we need founders and investors willing to play the long game.

The most interesting tech company in the banking to me is Column[0].

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.

[0]https://column.com

No blog post in nearly 3-years

https://column.com/blog

No product updates in over 7-months

https://column.com/changelog/

That doesn’t instill much confidence.

What do we understand under "banks"? If keeping with the simply notion of "stores funds and provides debit cards", the most common usage in EU, especially east, banks were deeply disrupted. Revolut and Wise took a large segment of the youth, who now also got hooked on more services like savings accounts and stocks. They have startup-like culture while being registered as standard banks. Obviously their services, quality and support are lightyears ahead of any traditional financial institution.

I'm a happy Revolut customer. Their app is great and it has features that banks here in Italy don't (or if they do they always charge it, that's why I'm trying to slowly break away from them). Banking in Italy is the worst of the worst. They are extremely well trained to make you waste time. Avoid at all costs Banco Posta. People are not just inefficent, they have absolutely no idea about anything you ask them and they love to make you wait eternally. I have recently asked for more information about a loan at another bank and surprisingly they refuse to send me a formal document to read all the terms and conditions. They literally sent me a plain text email with some numbers, when I required them formal details (the famous "small letter") about it they simply didn't reply.

I'm a revolut user, but I fail to understand how they plan to make any money off me with all they throw.

They are profitable for a few years now, afaik visa/master pays you a share of their profit each time customer makes a transaction(i.e. share of merchant fee). There are also credits, loans, exchange fees, subscription fees i.e. a lot products that make them money.

I believe disruption can come in the form of underwriting and servicing loans. The old model of large call centers that do buying and servicing loans has been around forever. It scales fairly well but it is costly and very inefficient. If those processes are lean then savings could be passed to pricing. Basically creating a credit union model to a national scale.

In developing countries (Africa, South Asia, South America) many of the banks were disrupted by mobile payments providers. Granted, it was more that they missed servicing the 80% of their markets that were unserviced but still needed to do things we all take for granted. Some of these are now the default payments systems.

In Brazil traditional banks are totally being disrupted. See Nubank.

Not sure abou that:

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

To be fair, you have to compare credit portfolios by product and customer size. That is how the Central Bank reports and tracks these numbers.

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.

Exactly, which is why Nubank is miles away from "disrupting" the traditional banks, and not only at what Nubank does.

Both "disruption" and "banks" are very broad terms. The three common subtypes of banks (retail, commercial, investment) live in different planets as far as infrastructure, products, business models etc.

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.

Exactly. Apps can be differentiators.

Also, large banks fundamentally work. People with money want excitement and disruption away from their money.

First thing you have to do is understand how banks actually work at root[0]

[0]: https://new-wayland.com/blog/framework-of-a-basic-bank/

You can't really "take deposits and issue loans" without just becoming a bank yourself. People start new banks all the time.

Or by "disrupting" does he just mean "end run around the laws and regulations"?

> People start new banks all the time

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...

Don't know the UK banking landscape, but it doesn't look that unusual in recent times: https://www.bankofengland.co.uk/prudential-regulation/new-ba...

Banking licenses are surely not an easy feat in America, but they are at least regularly issued. Not issuing any licenses for 150 years sounds quite crazy to my American ears, though as I understand it America is quite the outlier with thousands of active banks and credit unions.

The large banks have achieved scale in terms of accepting deposits and lending at lowish margins. To accept deposits they need regulatory approval and oversight.

For higher margins lending products they are absolutely being “disrupted” by private credit.

The big banks are larger then ever because of consolidation and inflation but I do think they're getting disrupted.

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.

Having worked in banking for many years (no longer), I can say with confidence, the big banks have a giant moat: regulation.

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.

> many of these regulations are largely ineffective ...

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/... ).

In the US most banks are no longer in the take deposits and give loans consumer business and haven’t been for a really long time.

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 only count startups that offer payments - and little else - as fintechs, then yeah, they're not displacing banks.

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.

I'd be thrilled if US banks figured out how to do "instant" money exchanges.

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.

It took us 15 years to get tap to pay; I wouldn't holdout on any of these dinos innovating anytime soon.

They want as much time as possible for that money to gain interest before it leaves their possession.

FedNow is slowly rolling out. We'll see what happens.

https://en.wikipedia.org/wiki/FedNow

FedNow's list of participating financial institutions on their web site is a downloadable Excel spreadsheet. Innovation indeed.

Revolut had credit cards for a few years but only in Lithuania

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

I think that the true reason is another one: credit cards come with credit, which people can choose not to pay back. It is complicated to recover money from a person abroad, possibly having to sue them in every EU state.

Nope. They still have only a Lithuanian license, plus maybe one for the UK.

All it takes to operate in the EU is a license from one member state.

Banks sell one thing--debt. Many have tried to "disrupt" that industry, but all attempts boil down to: getting a cut of payment fees or getting paid to resell debt. All "innovation" in this sector is done by crossing fingers and hoping the regulators don't notice you trying to use language to pretend you are a bank when you are not.

Take a look at Russian bank apps and ecosystems. How fadt they transfer money etc. I hate every time I'm in America. So stupid and ugly bank apps. It's funny they still not have portable card readers so I don't give my card to the waitress

Aren't the big banks buying the fintech companies that have more probability to create disruption?

There was a massive disruption to banking in 2008. Governments bailed them out.

Without being an expert on the topic I'm going hazard a guess that it's due to regulatory moats that keep challengers out of the arena, and banks endlessly lobby to maintain that regulatory capture.

In the UK there's no significant regulatory advantage to big banks outside of the mortgage market, yet the same dynamics occur. The biggest issue for new digital banks is customer acquisition cost. Most consumers won't change bank accounts unless you spend hundreds of pounds on adverts and incentives.

Disrupt cancer if you can. Don’t disrupt functioning system that is not broken.

I really hope this is satire.

https://en.wikipedia.org/wiki/M-Pesa Stuff like this did happen.

Disruption will take awhile. The current players have rigged the game in their favor. They have government officials, lobbyists, and 40+ years of shitty neoliberal economic theory behind them. The subprime mortgage crisis and subsequent bailout of banks by main street is an example.

It will take more than a credit card or fancy app to disrupt this corrupt machine.

I personally want my bank to be as boring as possible.

As an European I love Revolut, it has some nice features.

On the other hand when it comes to serious money spending (credit, mortgage) I want my physical local bank.

It's hard to break into banking because the big banks successfully used regulatory capture to lock out new participants.

Banking is a heavily regulated sector. Regulation effectively blocks any kind of disruption and perpetuates the established firms.

Could it be that the sub-prime mortgage goofballs did exactly that two decades ago, and the shields are still up?

This is like saying "nobody is disrupting AWS" and then pointing out that competitors don't have a version of AWS Glue.

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.

Because it's only possible in the USA. In the rest of the world everything is a bank and regulated as such.

"Nobody is going to put their money in Fred's Bank."---Steve Martin

Maybe because the Fintech companies are being built and largely financed by the banks?

This is probably a good thing. I don't want disruption in my bank.

Isn't this mostly due to fintech being the middleman?

Bitcoin was supposed to disrupt banking.

Look how that turned out.

Capital One did a great job shaking up consumer credit in the late 90s, and then branch banking in the mid 2000s with their weird combination cafe+branches. They're eighth in the US by domestic deposits today. Does the firm need to be headquartered in Silicon Valley for disruption to have occurred?

It was ING Direct who built the unusual US cafe/bank operation and eventually sold it all to Capital One as part of the great financial crisis restructuring in 2011.

https://www.ing.com/Newsroom/News/Press-releases/PROld/ING-t...

Interesting! I didn't know that

Chime would disagree with this article title...

Well, it's half true and half false. There are a lot of "new" fintech-ish banks competing on fees, transaction speed, overdrafts, etc. - bank-type things that matter to consumers. But it's true, there are no fintech banks competing to be "too big to fail" and getting that government bailout money. You have to look at crypto for equivalents of the Federal reserve, and people don't recognize those as banks. Although I would say, Coinbase is getting pretty close to a consumer-level "crypto bank".

I want AI to rename my million of duplicate files

Hm so when a fintech "disrupts" banks it ends up walking and quacking ... like a bank? Is it even a fintech any more?

There was one playing the move fast and break things playbook. SVB...

Does the article blatantly ignore the basic principle of fractional reserve?

A tiny deposit for a bank to hold means 7x more money to loan out, or something?

Uhmm... isn't that what crypto is basically?

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.

I’m not being a troll I’m seriously asking - how does crypto replace banks? Am I going to get a mortgage in BTC? If narrow banking, why give them my btc at all instead of holding myself? If not narrow banking then they are lending out my btc? Does that even work on blockchain? How do you do fractional reserve lending with a deflationary and one of one asset?

> how does crypto replace 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.

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Bitcoin

Ah yeah, nothing beats Bitcoin when it comes to banking /s

It's crazy to me that we're still using the same approach to banking, given that the banking system regularly blows up and drags the rest of the economy into a recession.

Regularly?

It’s crazy to me that we’re still living on Earth, given the climate risks and the natural disasters destroying people’s lives.