71–80 of 258 posts
You know what also provides most of the services of a bank? A credit union. Why aren't companies launching those?
When you're a bank you get rent from many economic transactions without providing anything of value except being rich to start. And even better, if you're a real bank, then you can create money out of thin air as debt on your balance sheet via fractional reserve banking. There's effectively a universal basic income for banks. What company wouldn't want to get in on that?
No. UBI is income (increases assets), while money creation in banks is balance-neutral (increases both assets and liabilities).
While technically during lending banks create both loans (assets) and deposits (liabilities), it is more complicated:
When a loan is taken, it is usually not taken just to sit in a bank account, it is to be spent. When that happens (by cash withdraw or transfer to a different bank), a bank must release/transfer base money, which it can get from cash deposits, incoming transfers or in exchange for some other assets.
Therefore, although banks create M1 money by lending, they are limited in practice by necessity to keep balance of base money. So it is more a distributed/emergent behavior, where each bank ability to create M1 money is limited by its market share and the rate of money production by other banks.
Some cryptocurrency communities push the idea of "Be your own bank", especially with hardware wallets specifically because of this problem of having to trust / rely on custodians. My sister-in-law had her accounts frozen for a year for something a business partner did. If she had all her money in her own hardware wallet, she wouldn't have lost access to her funds. Obviously, being your own bank is hard from a securit…
Just like sanctions against states they could not freeze your accounts, but they could prevent you from spending your money or collecting payments or making regular business.
Is this going to be the sort of phenomenon that we will eventually look back as a signifier of the dumb money economic bubble we're in, similar to past trends like the wild access to credit in the Roaring Twenties, the run up to the S&L crisis in the '80s, the worthless tech IPOs of the Dot-Com Bubble, the liar's loans of the 2000s, and another examples of rampant finacialization? If the environment is one in which n…
The tech companies aren't even underwriting the accounts. They are just resellers of accounts from actual banks, throwing on a fancy web interface and then data mining your transactions.
Another asnswer: Because the people making the business decisions in these companies is the only thing they can do. When you have no vision as a company or no visionary in your team, you get served by the countless consultants and ex-bankers who went to big-tech because of its the new Wallstreet. Of course, they have no idea what Tech does and is and of course no clue how to provide something of significant value. In…
Hats off to FB though, I think their perspective is the only innovative one out there.
Everyone is a bank today for the same reason everyone was a social network in the 00's. A few startups started encroaching into financial services territory, took all the risk (including regulatory), and now that it's clear it's something worth pursuing Big Tech is following, expecting to leverage their existing products/services/ecosystem to lock you in by yet another aspect your life.
- No Exit: Struggling to Survive a Modern Gold Rush (2014)
Another answer: because regular banks are awful to deal with. They don't have nice APIs to just move money around. They apply velocity limits at surprising times. They can terminate your account suddenly for opaque reasons. They charge high regular fees and even higher "gotcha" fees if you make a mistake. They can take back money sent to you for up to 90 days, but often can't get back money you sent to crooks even if…
I've had my debit card skimmed at gas stations twice and my wife has been defrauded by shady online merchants a couple times. Chase always handles it well and reverses the charges.
I have Private Client status which (granted requires a certain level of deposits) gets you a real human on the phone instantly.
I couldn't imagine getting that from Google or Robinhood.
When you're a bank you get rent from many economic transactions without providing anything of value except being rich to start. And even better, if you're a real bank, then you can create money out of thin air as debt on your balance sheet via fractional reserve banking. There's effectively a universal basic income for banks. What company wouldn't want to get in on that?
Thin air? What are all the employees doing then?
Imagine a normal grocery store. Then imagine it suddenly gets a button that makes more stock magically appear on the loading docks. Almost as much as they've sold since the last button press. It's great for profit margins, but the employees still have to do their jobs, and their jobs are basically unrelated to the magic button.
Earlier quoted context omitted.
Is that American banking? In the UK I can't say I've ever experienced such issues. I do bank to bank transfers fairly frequently.
Yes, the American banking system is just ridiculously bad. I remember studying abroad in New Zealand (in 2004!) and marveling at how EFTPOS was universal, everything was chip & pin, and funds transfers could easily be done online (and often clear the same day!). The cashiers would look at me strangely with my American credit card, and they would always check the signature. (Which, it may astound foreigners to learn,…
Moving to the US is like stepping back into the 70's, and then discovering that everyone around you think that everything is fine, their banks are fine, that US banks are somehow modern and cool.
Anecdote: I wired some money from my Chase bank account to my Swedish bank account, in USD. I made the transfer through the internet bank, but since it was "after hours" New York time, it was scheduled to transfer the next morning.
Early next morning I checked my Swedish bank account, they had received the money, exchanged it to SEK at a decent rate, and the money was immediately available for me to spend there.
A couple of hours later I receive an email from Chase, where they're telling me that they've now sent the money, and that I should expect to see the money in my Swedish bank account about three days later.
American banks suck.
Earlier quoted context omitted.
I bank with a shitty national bank (long story, need access to Zelle/P2P transfers). My emergency fund is 6 months expenses, low 5 figures. 150-200 basis points of interest annually is trivial when 1 or 2 wire fees ($20) to get access to those funds same day blows away all of interest gains over 6-12 months. If interest rate mattered to folks, more would move to providers offering higher rates (you see this sprouting…
If you have a checking account with the same bank you keep your emergency fund in then you can access the funds at any time with an online transfer and a check. (Discover & Ally offer checking accounts) It doesn't have to be your main checking account.