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No one is disrupting banks – at least not the big ones

popularfintech.com

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Re: No one is disrupting banks – at least not the big ones

#191

Post by intalentive »

doomroot wrote: post #5
hobs wrote: post #2

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”?

Re: No one is disrupting banks – at least not the big ones

#192

Post by nradov »

lxm wrote: post #159
throwaway2037 wrote: post #156

Earlier quoted context omitted.

> worker 401k vulnerability to dubious ETFs Can you explain this part in my detail? Do you mean money market funds that "broke the buck"?

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.

Re: No one is disrupting banks – at least not the big ones

#193

Post by nradov »

xwolfi wrote: post #165
ranger207 wrote: post #88

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 faste…

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 an…

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.

Re: No one is disrupting banks – at least not the big ones

#195

Post by Joel_Mckay »

nradov wrote: post #192
lxm wrote: post #159

Earlier quoted context omitted.

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

Re: No one is disrupting banks – at least not the big ones

#196

Post by abdullahkhalids »

smnrchrds wrote: post #178
abdullahkhalids wrote: post #135

Earlier quoted context omitted.

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.

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.

Re: No one is disrupting banks – at least not the big ones

#197

Post by Terr_ »

henry_bone wrote: post #99
Waterluvian wrote: post #6

Earlier quoted context omitted.

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.

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 fung…

> 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

Re: No one is disrupting banks – at least not the big ones

#198

Post by dotcoma »

miohtama wrote: post #77
Waterluvian wrote: post #6

Earlier quoted context omitted.

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.

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.

Re: No one is disrupting banks – at least not the big ones

#199

Post by dotcoma »

PaywallBuster wrote: post #38

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

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.

Re: No one is disrupting banks – at least not the big ones

#200

Post by kevin_nisbet »

abdullahkhalids wrote: post #196
smnrchrds wrote: post #178

Earlier quoted context omitted.

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.

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...

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