Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Profitability Challenge for Challenger Banks

fincog.nl

Post reply on HN
Print view View original

21–30 of 45 posts

Re: The Profitability Challenge for Challenger Banks

#21

Post by xiaodai »

benjaminwootton wrote: post #6

I think the challenge goes beyond just profitability. I’m currently locked out of my Revolut account due to a bug on their end. There is no telephone support and no in app support until after you are logged in. Apparently you have to contact them via Facebook or Twitter for assistance. They are forever destined to be a toy with this kind of approach to people’s money.

U r a toy. Just contact them bus Facebook. Think how much they r saving not having a phone contact. Some of the savings get passed to you

Re: The Profitability Challenge for Challenger Banks

#22

Post by blibble »

notyourday wrote: post #20
blibble wrote: post #11

always seemed to be lunacy to me, given: - the margins for retail banking were wiped out a long time ago - consumers have been used to free banking for decades (at least in the UK) - near-or-even-below zero interest rates for the last decade (with no signs of this ending) - the "legacy" competition are some of the most well captialised entities on the planet is a "legacy" bank going to pay several billion dollars to…

> - the margins for retail banking were wiped out a long time ago In the US retail banking is a cash cow: most of the country does not have enough money in the bank which means customers periodically pay overdraft fees. > - consumers have been used to free banking for decades (at least in the UK) In the US most of consumer banks have a service fee, some as high as $15/mo. > - the "legacy" competition are some of the…

the US does seem to be approximately 20 years behind the UK and the rest of Europe from a consumer banking perspective

maybe they'll have more luck there

Re: The Profitability Challenge for Challenger Banks

#24

Post by xioxox »

blibble wrote: post #22
notyourday wrote: post #20

Earlier quoted context omitted.

> - the margins for retail banking were wiped out a long time ago In the US retail banking is a cash cow: most of the country does not have enough money in the bank which means customers periodically pay overdraft fees. > - consumers have been used to free banking for decades (at least in the UK) In the US most of consumer banks have a service fee, some as high as $15/mo. > - the "legacy" competition are some of the…

the US does seem to be approximately 20 years behind the UK and the rest of Europe from a consumer banking perspective maybe they'll have more luck there

A lot of banks charge here in Germany. My previously free bank has started charging, presumably because of the low interest rates which make it hard to be profitable. A couple of online only banks are still free if you have enough turnover, however. Germany has a crazy number of small banks, compared to the likes of he UK.

Re: The Profitability Challenge for Challenger Banks

#25

Post by qubex »

Spinosaurus wrote: post #15

Are there any challenger banks with an API? I'm not entirely sure what I'd do with one but it seems like a neat idea.

The EU’s PSD2 (second Payment Services Directive) specifically introduces the concept of Third Party Providers (TPPs) that are allowed to interact with your bank account on your behalf either to collect/aggregate information or to initiate payments. These of course require an API to do so, but unfortunately, within the same piece of legislation, the TLA ‘API’ unfortunately suffers a namespace collision with “Authorised Payment Institution”, a lesser kind of online banking institution a step below the full EMI (Electronic Money Institution).

I’m currently heading a project to set up such an institution so I’m into this stuff up to my neck.

Re: The Profitability Challenge for Challenger Banks

#26

Post by tomatocracy »

There’s a catch 22 problem here I think. As least for me, a large part of the reason I’m not willing to commit to any of these banks as a primary account is precisely because they are unprofitable. Most people know what happened to banks when they ran out of money to fund their losses in 2008/9 and how that worked out for their customers (took months for people to get their money back).

It’s not like eg Uber where I take very little financial risk as a customer because I only pay them once the transaction is complete so as a consumer I don’t need to care about whether they’re sustainable as a business.

Add in their treatment of web and telephone as second class citizens at best (I don’t need a branch but I do need the website to be capable of being used as a primary access method and I do need decent telephone support), and I’m not surprised that most people won’t trust them.

Re: The Profitability Challenge for Challenger Banks

#27

Post by trollied »

blibble wrote: post #11

always seemed to be lunacy to me, given: - the margins for retail banking were wiped out a long time ago - consumers have been used to free banking for decades (at least in the UK) - near-or-even-below zero interest rates for the last decade (with no signs of this ending) - the "legacy" competition are some of the most well captialised entities on the planet is a "legacy" bank going to pay several billion dollars to…

> is a "legacy" bank going to pay several billion dollars to acquire a nice app with an unprofitable business behind it? I doubt it

You’re not buying that though. You’re buying the customer base. Getting another couple of million customers isn’t something to sniff at.

Re: The Profitability Challenge for Challenger Banks

#28

Post by trollied »

pkaye wrote: post #17
user5994461 wrote: post #3

Monzo and Revolut doing -58M and -40M a year. Ouch. Didn't see that coming. I guess better cash the paycheck somewhere else before they're the next MoviePass.

Aren't the accounts insured by government entities like the FDIC in the US?

In the UK current account deposits are insured up to £85k.

Northern Rock went pop ~8 years ago and the public did not lose money - the government did though.

Re: The Profitability Challenge for Challenger Banks

#29

Post by tialaramex »

pkaye wrote: post #17
user5994461 wrote: post #3

Monzo and Revolut doing -58M and -40M a year. Ouch. Didn't see that coming. I guess better cash the paycheck somewhere else before they're the next MoviePass.

Aren't the accounts insured by government entities like the FDIC in the US?

In practice there's the same effect (the first £X of an individual's credit balance will be refunded by the government if the bank fails, I think it's currently a hundred grand or something and in practice so far the government always pays everybody their full balance) but the mechanism is different.

Rather than an insurance fund the law just says if you're a bank and you didn't fail you're now on the hook to pay back the government. This is called "Last Man Standing". One intended benefit over FDIC is that there's an incentive to rat on a competitor taking undue risks, because if they fail you're eating that cost.

Post reply on HN