I hate sounding like a VC jerk, but the banking industry needs some serious disruption.
One of the ills of VC-mania is the ongoing assumption that a) problems that exist in the US exist everywhere and b) that there are no other problems.
(see also: Uber busting the "taxi monopoly")
And as for banking, well, it's somewhat worse in the USA than elsewhere but it's not like Europe is overflowing with awesome hi-tech banks. Yes there are a few "startup banks" in the UK and one in Germany that I know of, and that's about it for the entire continent. Moreover the vast majority of people don't use them and bank with the existing set of firms, many of which have legacy and decaying IT estates. Look at what happened with TSB recently. Total meltdown. Major IT outages in the UK banking sector have become commonplace; you don't hear about that happening in the US.
- Extremely high starting capital requirements (10-100 million USD)
- Knowledge on security, finance, and law, means you will be needing an expert team of lawyers, accountants, cryptographers, etc.
- An actual location and strictly controlled building to keep the physical money.
There are a lot more requirements but the first 3 make it almost impossible for a lay-man to start their own bank.
A better alternative to starting a new bank is buying a small bank. It may actually be cheaper than starting a new one.
Both my personal and business accounts are with these, and it's awesome. Starling for my personal account and Tide for the business one. I get notifications of payments usually before the in-store machine has finished sorting itself out. Also get nice things like being able to use Google Pay before the card arrives. I've just got married, and our joint account will be one of these.
I assume these banks have popped up from these EU regulations, as they didn't exist 3 years ago.
- Extremely high ($10 billion plus) market opportunity, with a ~0.1% to ~1% capital requirement.
- Recruit a team with the highly diverse skills needed to operate a modern bank.
- Have a secure location? Let us pay you to leverage assets from another startup.
Managing user interfaces to sell financial products is not the same as running a bank. This is why API's are so important. They allow innovation in the sale of financial products while keeping the actual risk calculations on deposits and loans heavily regulated.
Of course, banks don't like them. In the same way internet providers don't like net neutrality. Nobody wants to be commoditised. But this segregating of responsibility is the only way you can ensure positive change for consumers/businesses without introducing a bunch of risk into a critical piece of the economy.
That's MORE conservative. But it's only enabled through intelligent APIs, which banks in the US don't have. With Mint, you passed over your full banking credentials, which was absurd.
I'd also like to remove the ability to PULL money from my credit / debit cards. I want only to PUSH money from my bank. Allowing companies to pull is what allows the vast majority of identity theft.
That's the kind of disruption I want.
Give ME the control to organize, monitor, and control access to my funds.
- Universal, near-instantaneous per transaction alerts. It helps stop fraud right away rather than after-the-fact. It also helps solve problems while they are fresh rather than trying to resolve a month-old+ issue. Some countries overseas do this almost universally.
- On-restaurant-table credit card swipe rather than taking the card away and entering tip later. Many places overseas do this almost universally.
-- Side note on the txn alerts: I suppose it is due to the way Visa/MasterCard are processed, but I sometimes get alerts a day or more after i've done a credit card transaction. Some cards dont even have the option for alerts.
AMEX has great alters, almost instantaneous, but I suppose they control the entire stack, so that makes sense.
If they took the card away, how would you enter the card's PIN? That's why places outside the USA do the swipe on the table.
Oh, and you put the tip in on that receipt, and they go back and do a second entry of the tip (sometimes incorrectly, almost always higher when incorrect.)
Worse - the transaction alert -- if you get one -- is the pre-tip amount. Makes no sense.
This isn't a problem you can solve by changing the banking industry. This is a point-of-sale problem.
It's all part of a larger set of "problems with US financial services". The fact that it is technically different vendors is not relevant...
If the upstream providers provded the readers as a leased service instead-- maybe for a few dollars a month-- they could push out insecure gear in a timely manner more aggressively. Just reject connections from old devices because everyone renting the old model has been sent a new one already. It would also eliminate the price of equipment upgrades as a leverage for competitors to peel off customers.
From what I can tell, the machines are fairly locked to the service providers, and require fairly intensive setup, so it's not necessarily like an unlocked phone where you'd save money by buying a device independently of the service.
Why can't I ask for chip-and-pin or nothing? No chip-and-signature, no swipe-and-pin, no swipe-and-signature,no it's-less-than-$50-so-nobody-cares-and-we-don't-even-ask-that.
Why can't I have a card inactive by default-- if not used in a week, you have to press a button in the app to re-activate it before it works again? Then you could potentially add "the next charge will be $120 +/- 10. Those would make for a smaller target for spray-and-pray fraud.
Conversely, when they do try to protect you, they do a terrible job of it. My bank (one of the largest in the county) has a particular hard-on for the website of a large regional electronics retailer. In person, fine, but if you order from their site, odds are 50:50 it will fail and your card will get fraud locked. I am significantly less likely to order from them because I know it's going to be a hassle, even when I see an offer I want. If I could white-list the merchant, problem solved. If many customers whitelist them, it might provide better information for their automated anti-fraud systems.
But my money is not on the line. That's what a credit card is - I'm using the bank's money, and I am not charged for fraud. If the bank was seeing excessive amounts of fraud, they would ratchet up security measures.
However, any security measures should be treated with skepticism - do they measurably increase security, or do they serve merely to transfer responsibility away from the banks?
"Why can't I have a card inactive by default-"
You can get single use numbers on many cards, which I think would solve your use case.
Well, I tend to think in context of a debit card, but covering your ears and screaming "zero fraud liability" doesn't solve everything.
You're still incurring costs and hassle getting your account detangled after a fraud, and the trouble for getting the cards reissued. The bank itself is going to have to deal with the costs of insurance and payments it was unable to recover. Eventually, somehow we're paying for that in higher fees or worse rates.
It also tends to undermine the fundamental legitimacy of the bank. Remember when banks tended to be big free-standing buildings with huge visible vaults? The message was "we're keeping your money safe." Not "we don't keep it safe, but we have really awesome insurance when we inevitably mess it uo!"
- ubiquitous NFC-based payment systems
I assume you mean inter-bank. Many US banks do instant transfer between accounts in the same bank, even if different account holders. On the inter-bank front, there’s Zelle that many US banks support that’s instant and free, but it has stupidly low limits. On the kinda instant front (aka under 15min), wiretransfers exist but they are a poor UX universally and have a steep fee generally (my bank does it for free, but I have to have a high end account for that).