How to become a bank (2016)
bankofengland.co.uk
bankofengland.co.uk
It was a bit more opaque back when we did it, before us only a handful of new banks had been created since Metro bank, and that was the first in 125 years..
US banking is slightly easier, in the sense that one may be able to either go through the tortuous process of setting up your own bank, or buying a corporation with the requisite licenses and (ideally) existing customer base.
EDIT: Rogers Communications (a Canadian telecommunications provider) applied for a banking license in September 2011 and launched in 2013[1]. I believe the bar is somewhat lower for existing domestic/Canadian companies.
That said, once you get there, the sorts of things you're allowed to do as a bank are pretty staggering (but this tends to lead to efficiency, and in turn stability).
Added: There is a golden path to becoming a bank under the Federal Bank Act these days, and it generally includes becoming a creditor first. Much of the process is about waiting for nearly inevitable approvals.
The regulators in the U.S. will finally give in, but we're more likely to see a 'challenger' bank as a spin out of an existing bank over the next few years IMO.
N26 and other UK/European challenger banks are entering the U.S. market this summer, but they will not have a banking license.
[1] https://www.americanbanker.com/slideshow/rebirth-the-de-novo...
I do wish I could do the same as what you’ve done and disrupt the Canadian banking system.
The UK banking system seems incredibly more efficient and fair to consumers than the Canadian banking system does.
Having challenger banks makes it interesting as it pushes me to think more outside the box and have ammunition to convince internal stakeholders to experiment with new concepts.
I also have a hypothesis that there are some things you can do digital-only and some things you need some human interaction so looking at what challenger banks are doing is a form of validating my hypothesis.
- fellow Canadian annoyed by our banking system
I think thats the point of this push by the Bank Of England. UK high street banking was dominated by a handful of huge, old, banks that had to be bailed out during the 2008 banking crisis because pretty much the entire population used them. A larger number of smaller banks reduces the moral hazard around "too big to fail" banks, allows management who cause a bank failure to lose their jobs, their share options, and their company, and reduces the chances of the government having to nearly bankrupt itself to bail them out.
Plus if London wants to continue to be a world centre of finance then encouraging innovative new banks to base there cant exactly do any harm.
The bailing out procedure should become a prepackaged administration process via the central bank. Banks should know if they exhaust their capital buffers the bank will be placed into administration and refloated by the central bank. ALL equity holders in the bank will make a total loss.
That then sets expectations correctly.
Zimbabwe would like to have a word. I bring this up not to be snarky, but because that was the thinking of the president at the time - he once asked "Have you ever heard of a country that collapsed because of borrowing?"[1]. I suppose he said this before the hyperinflation kicked in.
1. https://www.economist.com/news/middle-east-and-africa/217314...
Argentina defaults about once a decade.
I wonder what would move you to make such an obviously false statement.
It's the usual stuff about the customer being responsible for everything and they can change the terms at any time without option to accept or reject them. But beyond that it also appears to say that you're responsible for using a smartphone that supports their app. Given they can drop support for a device at any time, this has the potential to lock you out until you get a new phone.
I'm also not sure about their use of biometrics for security. I wouldn't use an ordinary front facing camera to unlock my phone so why would I use it to secure my bank account?
[0] https://www.atombank.co.uk/application-terms-and-conditions
Mind-boggling stuff like you being responsible for their bugs:
> 24.14. To the extent permitted by applicable law, Revolut is not liable, and you agree not to hold it responsible, for any damages or losses (including, but not limited to, loss of money, goodwill, or reputation, profits, or other intangible losses or any special, indirect, or consequential damages) resulting directly or indirectly from:
> glitches, bugs, errors, or inaccuracies of any kind in the Revolut Services;
> 17.2. If for any reason (including, but not limited to, any technical errors on our behalf or on behalf of our third-party providers) you have a negative balance in your Revolut Electronic Money Account, you agree to immediately Top-Up the required amount to correct the negative balance, such amounts being due without the need for previous notification. If you fail to do so:
Banks are notorious for their terms, but this is taking it to a new level. Move fast, break things, and don't be responsible.
To be fair, I'm not sure how enforceable these clauses are, I find it hard to believe that a judge would side with them if a customer's money suddenly vanish.
Disclaimer: I work for Monzo
Do you guys have some Scala in your code base ? or do you strictly use Go?
We're almost entirely Go, but do use other languages where it makes sense to - usually because there's a useful library, or great tooling / community for a particular use case. For example we have a handful of Python services for ML.
The Bank of England and the FCA's resources on how to go through the process have been invaluable. The founding team is American and we've literally relocated to the UK because of the friendlier regulatory environment in order to do this.
Sure, banking is a serious business, but I think it'd be beneficial to have a special category for small startup banks only requiring $5 to $10 million or so, with adequate supervision etc.
The problem we have though is that the culture of our banks is rotten to the core, and dominated by four main players. The regulators (ASIC and APRA) are underfunded and mainly turn a blind eye to a lot of what goes on (mainly going after smaller financial services companies who can't afford the same kind of lawyers as the banks). We're only finally having a proper enquiry now after investigative journalists having uncovered a lot of this years and years ago, and most people are pretty shocked at what's going on.
I think the sector could benefit from smaller players coming in (hopefully with better morals), but the regulatory requirements are helping to protect the big banks' strangleholds.
"To authorise a bank we must consider it resolvable (in bankruptcy)" is also a sensible bit of planning: you're not allowed to dump a toxic collapse on the central bank and run away.
The bit about "calling yourself a bank" reminds me of https://en.wikipedia.org/wiki/Banknotes_of_the_Black_Sheep_C...
An investor in a startup I was working for made his way onto the board of a local (small town) bank. He was already very wealthy from real-estate. He was quite proud of himself for making it onto the board of that small bank. It seemed odd to me because he was already so wealthy, he didn't really need to be on that tiny bank board.
I asked him about what it took to get onto the board, how one starts a bank and so forth. I'll never forget what he said: "Owning property is a right, owning a bank is a privilege".
In retrospect that does seem to be in line with how one gets into banking (as an owner) in the United States.
Currently I have an account with [large famous bank] who think I'm still living in the UK. If they ever find out I'm not, the terms of my account say they're allowed to close it.
So this is one thing I'd love to see from "new" banks - services for people who are UK citizens but do not reside in the UK.
Because it's a protocol, in theory you just need to have the software installed in your computer and you can start being a bank.
This is similar to the web for publishing. You just need to plug your computer to the internet and start serving your website. Before this if you didn't have the time, energy and luck of finding a publisher it was hard to publish a book.
This is a huge simplification but I just wanted to highlight one interesting aspect of cryptocurrencies.
http://www.jstor.org/stable/2338493
And yes, it pretty much describes the current crypto scene as well.
You technically can provide banking services (the core one, of course, being moneylending) with that, and this has been traditionally done that way since literally biblical times, but nowadays that would be just as illegal as doing the same with Bitcoin.
However, consider that technically I could create a "New PayPal" as I could receive digital payments and give cash to my customers. Of course this doesn't cover the legal aspect.
If you'd want to release something like PayPal in 1998, the only possibility is being rich or having rich friends. That's the only way credit card companies are going to consider doing business with you.
Now with Bitcoin you're relieved of that obstacle but of course you have to still deal with the law.
"How I set out to simplify ordering Starbucks and created an internal banking system."
http://royrapoport.blogspot.com/2011/05/coffee-and-its-effec...