The Uberization of Money | Hacker News Reader

The Uberization of Money

wsj.com

61 pointsakg_6712 comments

I think some of the claims are a bit over-stated.

For instance, I agree that the mortgage loan process is silly but it is heavily supported by government agencies Fannie and Freddie, and that likely won't go away. Sure, technology and the law will soon allow you to borrow directly through a peer to peer model, but do you think anyone really would lend you money for a 30 year mortgage for less than 4%? There may be a market for less credit worthy borrowers that have trouble getting a mortgage now, but politicians would surely crack down on that.

Sofi, which lends to very low credit risk students has been very successful, but that's because there is some room in the rate which you would pay going through Stafford loans (around 6-8%) so that makes sense. So there a student can get a rate lower than the one-size-fits-all rate of Stafford loans but I think that rate is too low for mortgages to allow for a more competitive private market. There may be some room to better assess credit risk for private student loans, but considering that 85% of student loans are public [0] and there is a lot of regulatory uncertainty regarding Consumer Protection legislation, I think that opportunity is limited.

In terms of investment advice, low cost ETFs already exist and are pretty amazing for what they do. You can invest in a broad index, albeit passively managed, at ~15 basis points (0.10%). I don't know anyone who is willing to fall over themselves to manage your money for less.

[0] http://www.huffingtonpost.com/mobileweb/2012/04/24/obamas-st...

There's plenty of room at the lower end. Of course if you're already a millionaire, investing and loans are easy. But if you only have $100, they're not. Traditional investing and banking are designed to exclude the lower class/working class, to prey on them, and to be a losing game for them.

Even if you can get by the minimum balance limits, when you have to pay a $10 fee to buy and a $10 fee to sell, you need to beat a 20% return just to break even on a $100 investment, let alone make a profit. But without the fees and the minimums millions more people could be investing a bit here and there and growing it.

Predatory payday loans and rent-to-own businesses are enormous - even though they depend on exploiting people who really can't afford them. If there were a better alternative, millions of people might use it.

With the middle class shrinking, the market is growing.

I agree that investing $100 in a stock isn't worth the time of a bank so the $10 fee they charge to purchase an ETF is high, but I think that would be the case for just about anyone because of the cost of even doing the book keeping, statements, etc. For instance, every ETF I invest in, I get the prospectus in the mail. That costs money to ship every year. They have to manage things like proxies voting as well. It's just not worth it to a bank. The $0.15 a year (15 bp of $100) in fees won't even coverage postage.

Pay-day loans may appear sleazy but the companies that administer them don't have very high margins. There are risks to those loans and the small nature means that fixed costs are spread over a smaller base. You can review the financials of public companies in this space. EZCorp [0] and Cash America International [1] are in that space. Their last profit margins are 4.8% and -0.95%, respectively. Why are they so low? I don't know, but I don't claim to know enough about this market to make broad statements about exploitation or abuse. I just know that, like many markets in the US, there appear to be a low barrier to entry and competition eventually shrinks margins.

Maybe you're right and they're doing some kind of financial trickery to appear as though they aren't making enormous profits, but if you believe that, by all means, enter the industry and change it from within.

[0] http://money.cnn.com/quote/quote.html?symb=EZPW&source=story... [1] http://money.cnn.com/quote/quote.html?symb=CSH&source=story_...

There's an app called Robinhood[1] that allows you to trade for free. The purchase window is 24 hours, so I assume they short the stocks or otherwise leverage the daily fluctuations. For a legal way to gamble on the market for medium to long term, I find it intriguing.

[1]https://www.robinhood.com/

Is there no equivalent to Investment Trust in-house savings schemes in the USA?

These are designed to allow small monthly investments cheaply ie £25/£50 per month.

SoFi does mortgages now, seems like they started about a year ago. They seem to be willing to do a non-conforming 30 year fixed for pretty close to 4%.

I'm not sure if they do the same in the US but here in Australia most banks do pre-approvals for home loans. It made the process dead simple for me.

In my case I spent about 45 mins one afternoon in a meeting with mortgage officer. Came out with a document saying I was conditionally approved for a loan of up to $X which was good for six months.

Then I went looking for a place.

There is probably some room for streamlining the process but most people my age that I know tended to go through the same Pre-approval route I did. The bank does all the background checks, diligence and such while you are still looking for a place to purchase which seems sensible to me.

I'd be terrified to entrust my money to a startup 'disrupting' the financial industry with a slick UI or Android app. Financial companies have their value in minimizing risk, not in the UI or frontend[1].

Actually transferring money is dead simple: I can sign a piece of paper(even electronically) agreeing to pay someone $500 in the future. That paper carries the same weight as money, but its value is reduced by the risk of default or the hassle of going through the court system to collect. People who correctly guess who will actually deliver on their word can make money by buying that $500 at a discount(say $480). It's too easy to make a bunch of deals showing $20 profits on the books that are really $480 losses that show up years after.

Financial companies will often play a big financial risk shell-game where they'll take on a certain risk to make money, but defer other risks to a different company in a big chain. ACH transfers and credit card merchant accounts are two examples(a chain of banks taking risk transferring money, or a chain of merchant->sales agent->bank->visa/mastercard for chargeback risk). The only reason US mortgages are so cheap in the first place is because they get immediately sold to a government-sponsored company.

My local bank actually has a lot of value because I've had an account with them for 8 years: They can easily see I'm not a big risk to them, so they can deal with me without worrying too much. They can give references to other financial institutions.

It's too easy to get eaten by fraud as a tech company. The tech is really the least important part of being in finance. The hard part is in trusting your customers. The loan officer takes weeks to pore through documents because these increase the banks' ability to trust you on the deal. They spend hundreds of dollars contracting appraisal companies to physically inspect the property again and again because it slightly reduces the chance of a bad deal. If a tech company can do this cheaper, then they can sell this service directly to the banks and make billions. Any data that you would collect on your web app, the banks could probably demand documentation for as part of the loan process.

[1] Okay, Paypal makes it easy for me to transfer money internationally, so that's something of a UI issue with being able to interface with N countries' different banks. But I bet their internal meetings talk about how to gather enough information on merchants/people in Greece so as to minimize the risk of default, rather than the technical issues of interfacing with Greek banks.

> I'd be terrified to entrust my money to a startup 'disrupting' the financial industry with a slick UI or Android app. Financial companies have their value in minimizing risk, not in the UI or frontend[1].

There's no reason they can't do both, although many struggle to innovate because of cultural and organizational issues.

One of the interesting things about the 'Uberization of money' is it shows another way that social organization can be high-tech. And integrating high tech into society better allows us to benefit more from technology. Ultimately this should mean society evolves along with technology much more quickly. Which should provide more opportunities for testing high tech solutions to societal problems like inequality and resource management.

Where I think this is going is towards better holistic accounting for society that will eventually mean keeping more than one common point value (money) for each entity. I think having a consistent system for tracking resources is something that can enhance (rather than replace) the utility of universal trade technologies like currency.

A big challenge is getting technocrats and moneytheists to synthesize their ideas.

Systems like Ethereum, bitcoin, Resiliance seem relevant. I think we may be able to get a common web assembly platform or something to help us evolve an IoT/resource schema and module system. A common, deeply semantic and high tech platform, integrated into social regulation and physical reality generally, will allow society to take holistic measurements from various viewpoints and quickly adapt to improved or diverse ideas for organization.

Lots of friction when it comes to financing just about anything nowadays. But everyone has pockets so if you connect them via a platform, it becomes possible to crowdsource anything: project financing, student loans, stock ownership, etc. A less relevant but interesting point is that the future job of a broker will be entirely automated.

is 'uberization' the new 'big data'?

can't take seriously any article using this word in its title

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