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Comment by quirkot | Hacker News Reader

The word on the street in the credit union industry is that you need $500 million in assets to be long term viable. It could be lower for a bank, but you'd need a laser focused niche.

[edit] source: I sit on the board of a credit union. This is a concern driven by the regulatory burden and cost to maintain a competitive IT infrastructure

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There is a company I spoke to while looking for a job during my garden leave that is trying to build a "web banking platform as a service"

You should check them out: https://www.narmitech.com/

I found them on the "Who's hiring page" here on HN and they seemed very on the ball (speaking as someone with lots of big bank tech operations experience).

Great find! Would love to find a similar company on the european market!

Check Out Solaris Bank. AFAIK they provide some someehat similar Services.

Thanks for this, very nice find!!

(ninja edit, found their pricing) Their pricing seems decent https://www.solarisbank.com/content/partner/preis-_und_leist...

Also check out Griffin: https://griffin.sh

Now that's interesting.

I presume this is focused at retail banking? And focusses on the customer-facing system?

Looking at the api, it's seems very UK-focussed.

I had this as an idea a couple days ago, ha.

You don't even need $500m to start a "real" bank.

The problem is that banking is a business for suckers. Banks only make money because, theoretically, they have low capital costs. But these days there are many, many entities flush with capital and eager to lend and they certainly don't care about actual cash flows or hard assets. In a world with 100B VC funds and SBICs and sovereign funds all desperate for any kind of real growth only suckers actually go to the bank for loans. And actually loaning real money to such people won't move the needle. This makes banking an inherently risky, and very boring commodity business. In the UK everybody's constantly asking why banks won't lend to anybody but real-estate developers and real-estate investors. What else are they supposed to do to pay their rent? Finance another kebab shop?

China, frankly, has done the right thing and fully embraced shadow banking. Having the economy held hostage by a bunch of golfers is insane. Extend the special privileges enjoyed by banks to a wide array of institutions and you will see capital find its way to the best allocators. This isn't about deregulating banks. This is about recognizing there are wide array of lenders out there who are ready to invest. Bring the shadow banks in from the cold.

US Banking makes ~175 Billion in profits per year.

There are few industries that even approach that.

Banking is the true oldest profession. It might be that the barriers-to-entry and minimum viable customer base are sufficient to keep out most ventures without serious subject matter expertise and deep pockets backing.

>banking is the oldest profession.

I hope you're not serious about that.

That's really more of a comment on market size than anything else, though. Everytime money moves it's an opportunity to profit.

The Big Six made most of that money and they don't do much actual traditional banking these days. The other 6500 US banks are hardly raking it in.

> and cost to maintain a competitive IT infrastructure

I would actually counter this with the point that many of the historic banks are so steeped in technical debt that newcomers are at massive advantage in terms of iteration speed and IT cost. This comes from a lack of competition (until very recently), and cultural problems at the executive level that stop them from considering themselves technology oriented firms.

Look at Monzo in the UK, recently given full banking license, been on the scene for 3 years now.

No bank in the UK has been able to come close on ease of use/access, onboarding speed, settlement speed, customer service, clarity and feature set of their current account. From the outside, it looks like they aren't even trying...

Has there been any talk of credit unions pooling resources on some of the IT stuff? Everyone expects a mobile app nowadays, but it doesn't make much economic sense for every single credit union to build their own.

A lot of credit unions use Symitar Episys and there are vendors which sell apps and websites for the platform.

Look into CUSOs. There are players that cater to that niche.

There is an active market for vendor software, as indicated by the other replies. The real expense driver isn't necessarily that "you need an app" but that "you need an app that is either very hardened or safely quarantined from your core infrastructure". And more generally, yeah the front-end stuff is kinda crappy, but it's because the back-end has to connect to a bunch of different systems with weird proprietary protocols and it has to work 100%. Every. single. penny.

And if you're a $100-$200 million in assets credit union, you may have an IT team of 2-3 people (that's a swag, but it wouldn't be > 5)

Two separate Canadian credit unions I use have the exact same app layout, (island savings, vancity) so I imagine that's already happening to some extent.

The company I work for develops software, including mobile apps, for smaller banks and credit unions that can't afford their own development team. We have more than a thousand clients and all of their apps are basically built on the same codebase with small branding customisations (colours, images etc). Company is called Fiserv, if anyone is interested.

What if you don’t raise money from ordinary depositors?

I really liked the Beal Bank model when I read about it, they raised from CDs, money market funds, etc which had a low funding cost but not much IT needs. The guy who started it is worth 10B+ now

I think you may have it backwards. CDs and money market funds are actually liabilities for the financial institution. They're ways of paying customers more in the hopes of attracting deposits.

There are non-depository financial institutions, but you'd be more familiar with them by other names: investment banks, insurance companies, pension funds, mutual funds

Yes, they're liabilities just like deposits. But if you offer them and not regular deposits (like the bank I mentioned) you don't need to built out a whole infrastructure for payments, checks, etc, just for the much more limited set of actions you need to support those.

Maybe a little off topic, but I'm curious, how did you get on the board?

There is a vote every year and I looked at the candidates and thought "wait a minute! these are just normal people like me!" so the next year I ran.

I highly recommend it. Most CU boards are in desperate need of younger members (younger here being <50), you learn a TON about governance vs management vs doing the work, and it looks good on a resume too

Is there added risk for a credit union to be in a specific niche? Say, for tech workers.

Perhaps, but serving a specific niche is exactly the origin and general mission of credit unions in the US. Most CUs now try to have as broad a membership as possible but this is a recent trend.

I'd guess that being in a niche brings you a better understanding of the environment but the downside is that if that niche tanks, you're toast.

Credit unions (or their closest form) in Europe, (co-op banks and various incarnations such as Sparkasses or Caisses d'Epargne) are now spreading their risks, and to alleviate the geographical niche issue merged together (several dozens Caisses d'Epargne in France 15 years ago, about ten now for instance).

Other forms of pseudo co-op banks such as Credit Agricole (which started as a network of farmers credit unions) or Caja Rural are now banking behemoths doing everything from retail banking to investment, HFT: Credit Agricole is now probably in the top 10 largest banks worldwide.

Credit Agricole recently entered the top 10, as per their own PR:

http://credit-agricole.ro/en/2018/05/23/credit-agricole-ente...

This is incredibly sad.

I've used CA in France and it was a very miserable experience, even by French banking standards (which on themselves are surprisingly low).

I'm using them in Egypt and it's a shitty experience too. Better than French CA, better than most government-owned banks in Egypt, but still shitty.

I've heard many horror stories about CA personal banking in France (bank transfer taking ages, random charges appearing/disappearing etc).

Their offer towards startups "Le Village By CA" seems, however, interesting.

When I mentioned a laser focused niche, I meant that by being niche focused (like Venmo or Paypal) you can avoid a lot of the overhead needed for having a wider selection of banking services. The common example here is no physical locations, no tellers, less overhead. But it also applies that if you don't do mortgage lending you don't need mortgage specialists and you have less interest rate risk to manage

[edit] re: ldayley comment, I'm referring to vertical niches of service rather than horizontal market niches

If I had $500M the least fun thing I could do is start a bank.

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