Hacker News Reader

> My benchmark is Charles Schwab Bank, which offers free ATM fees on any ATM, anywhere. It's what many millennials that I know use. But, it's a bad product and not very user-friendly.

Why do you say it's a bad product? I use Schwab as my main account and it works great for me.

I'm also using Schwab as my main account and for the most part enjoy it. It's not as (seemingly) simple and intuitive as the other products philip1209 mentioned, though. It's a well-established bank/brokerage firm, and it shows in the UI.

Same here, they also have very good service. 24/7 chat assistance and I haven't waited for more than 30 seconds to be connected to a customer service representative.

I love Schwab's checking account product because it's highly functional. But, I don't think that it has mass-market appeal. It appeals to a rational buyer, not an emotional one.

The opportunity here for a startup bank is to replace credit card spending in the USA. The potential earnings are huge if you can get consumers to spend on a debit card instead of a credit card (because the rake is higher).

To make a checking account capture the spending market in the USA, it needs to feel premium and focused - like the Amex app. The spending analysis needs to be great, the card needs easy control in the mobile app, and it needs to inspire confidence. It also needs to feel like a trusted, approachable brand.

Schwab makes most of their money on investments. I don't foresee them trying to give mass-market appeal to their checking account, separate from the investment account.

A case study in this field is Marcus, a savings app from Goldman Sachs. If Schwab spun out their checking account into a separate sub-brand with branding that appeals to millennials and had a spending-focused mobile app, I could see them doing really well: https://www.marcus.com/us/en/savings

> The opportunity here for a startup bank is to replace credit card spending in the USA. The potential earnings are huge if you can get consumers to spend on a debit card instead of a credit card (because the rake is higher).

I think the converse is true. Card issuers earn 1 percent points higher interchange rates on credit cards (2.60%) than debit cards (1.60%).

Once the bank has more than $10 billion in assets, they legally have to reduce their debit card swipe fees to 0.05%.

> I love Schwab's checking account product because it's highly functional. But, I don't think that it has mass-market appeal. It appeals to a rational buyer, not an emotional one.

Isn't that the wrong perspective on a financial product? I agree that good design is important, to a degree. Once a certain level is hit, you're not going to gain/lose very many customers based upon the UI.

I don't think anyone should favor one bank over another for emotional reasons Also, I'm not sure design differences qualifies as "emotional"; I think a better word would be "design" or "aesthetic".

If Bank A offers you a 4% interest rate on a loan and Bank B offers you a 4.1% interest rate on a loan, I think most people would pick Bank A over Bank B (assuming fee structures and customer service is more or less equal). Even if Bank B has a beautiful UI as opposed to Bank A's equally functional but okay looking UI.

By "emotional" vs. "rational" the parent is probably referring to the type of investor/trader that would use a Schwab account, meaning someone who understands the risks they are taking on and won't flinch when the market goes sideways. Nothing to do with UI or product design.

A coworker looked over my shoulder as I was signing up for Robinhood checking today, saw the American flag debit card and literally yelled, "I NEED THAT CARD!". He signed up using my referral code, you have to learn that you're not the normal consumer.

> Even if Bank B has a beautiful UI as opposed to Bank A's equally functional but okay looking UI.

If only those were the options. I'm considering dropping one of my banks after their mobile-first aesthetic redesign that made their website drastically less functional. (Less information density, more clicks to accomplish anything, extreme non-obviousness of how to access various features.) It's been a year or two, and functionality remains significantly degraded compared to their old website.

What incentive would I have to use a well branded debit card over a credit card that gives cash back?

I could see an effective marketing campaign making debit a social signal.

Being able to make a large purchase on debit means you can afford it right now-- just as dropping a stack of $100 notes would signal.

In contrast, paying with credit can be a pose-- you look like you can afford the $1000 purchase, but it hides the dark secret that you'll be paying for it well into the next decade.

I think it's also about control and understanding your spending.

Schwab is excellent. Their "high-yield" (lol) investor checking/brokerage account is a good offering due to no minimums, unlimited foreign ATM fee rebates, unlimited checks, etc. Their customer support is amazing. Three rings and a human picks up the phone.

My direct deposits go there, but I moved all my investments over to Interactive Brokers since Schwab doesn't offer (to my knowledge) portfolio margin and Schwab's margin rates are usurious.

Just out of curiosity how do you employ margin in your personal investment portfolio?

I have risk management parameters for all the positions in my portfolio and for my portfolio overall. I use the kelly criterion to size my trades (beta-hedged intra-sector constituent spread trades). Margin is just additional capital I can allocate and get a slightly smaller return on. I'm about 1.5x leveraged on equities and 6x on forex right now.

FWIW, Schwab does have portfolio margin, although I have no idea what the rates are.

Good to know, but AFAIK portfolio margin doesn't give you different margin _rates_ anywhere... Schwab is almost 10% starting vs IB's 3.6% right now

My experience as well. Schwab customer service compared to my other checking is consistently and notably better.

For me the killer is no foreign transaction fees. If Robinhood allows world wide ATM + no foreign transaction fees I'd switch in a heartbeat. I dont use Schwab for equities, I use Robinhood & Wealthfront

I use Scwhab "high yield" (lol) as my primary checking account. I find it worthwhile due to the simple requirements/no worry of random fees, and because I can walk up to any crappy atm anywhere in the world and just get money without thinking about it. My experiences with customer service have been positive. But their approach to security is an absolute joke. They're an online-only bank, that stores your password in plaintext (and don't allow your passwords to be more than 8 characters/have any non-alphanumeric characters), regularly asks you to type your social security number over the phone, and have such poor fraud detection that I have their IVR memorized to just get them to leave me alone because they have cried wolf so many times.

In America, I don't think contactless matters that much currently.

It's really a crap shoot if any specific retailer supports contactless, no major metro system that I know of support direct debit / credit contactless cards and no major bank or credit card company issues contactless cards.

If you want to use contactless in america, you add the card to apple / google / samsung pay and use your phone for NFC payments. I get a feeling that america will do a 'leapfrog' in contactless and go directly to smartphone only contactless cards than ever issue a contactless card in the mass market.

Cashier was shocked when I used my contactless card in middle of SF. She nearly screamed "WHAT DID YOU JUST DO???". Meanwhile even in smallest villages of Europe no one bats an eye anymore. America is bizarre!

I just flew through 4 different airports in the last week, and every single one of them, the payment device had a chip reader, but all of them were blocked with a piece of cardstock instructing the person to swipe.

Why? (I think they're all run by the same company, HMSHost, who, AFAICT as a traveler, has a monopoly on airport food.)

This is a perfect example of how bonkers/stupid banking is in the USA. If the retailer allows you to do a chip/pin transaction (much more secure than a magnetic stripe) THEY are liable for any fraud. Whereas a magnetic stripe transaction (super insecure) places all liability on the payment processor. So there is a perverse incentive to stick with old crappy technology. https://qz.com/717876/the-chip-card-transition-in-the-us-has...

And in Berlin the cashier eyed me suspiciously when I tried to use Google Pay. He was totally expecting the payment to not go through

It was deployed in the US 10+ years ago but few merchants upgraded to terminals that supported it so contactless died off.

Yeah America is fairly bizarre in what is advanced and what is from 30 years ago. But you do get things like generous rewards cards, no exchange fee international ATM & credit cards on many accounts and so on. Not to mention cheap consumer goods.

In Canada we had none of that.

> no major bank or credit card company issues contactless cards

Citibank's Costco Visa card is contactless

In New Zealand a lot of retailers added contactless, but are now removing it again as supposedly the fees charged by Visa/Mastercard are rather high.

I just got a Capital One card a month or so ago and unless I'm completely misunderstanding the graphics, it is contactless. I think they qualify as a major credit card company.

I've already switched to Apple Pay anyway.

Most Amex US cards are now issued with contactless.

Chase is about to add it to all their cards.

Capital One cards all seem to have it, too.

I clearly missed the boat on that one, when did they start doing that? Mine is still swipe + chip only.

That must be very recent. I had contactless cards on half my cards in Canada a decade before hand in comparison.

> I consistently heard that Monzo's competitors like Revolut are going to be a future case study in scaling before great product/market fit. I don't know how many people have Revolut accounts, but nobody seems to be using their cards in public.

Monzo is a licensed bank in the UK, and Revolut is not.

Still, Revolut has about 30% more customers in the UK than Monzo, and about 3x more in total, since it's available in the entire EU. And, unlike Monzo, which is still losing money, Revolut has been profitable since February 2018.

That's because Revolut does much more than Monzo. It provides multiple premium account types, virtual credit cards for online payments, business accounts with open API access, credit, insurance, and soon – fee-free stock trading like Robinhood.

Revolut have a banking license now: https://techcrunch.com/2018/12/12/revolut-gets-european-bank...

True. Revolut got its banking license in Lithuania, not in the UK. That's why people in London might prefer Monzo.

> Simple tried to reinvent banking, but they never seemed to go beyond polishing the UI.

Simple closed my account with no notice or recourse, because they failed to notify me that I needed to update some information.

I honestly can't believe I trusted my money to people so incompetent at even the basics of business.

> he US seems to have a wave of startups trying to reinvent checking accounts right now. I wonder which, if any, will take the market

Square's Cash App + Cash Card is taking the lead here, IMO. Card, direct deposit, ATM usage, p2p payments, rewards program.

They've been the #1 app in finance all year on the Apple store, and were #1 in all free apps for a little while this past week. They are massively popular in the south, but the rest of the country may catch up, but I sort of wonder if silicon valley is gonna miss the rise since its out of sight for the time being. For growth and reach see for example:

Graph over time: https://trends.google.com/trends/explore?date=all&geo=US&q=c...

States where cash app dominates so far: https://trends.google.com/trends/explore?date=today%201-m&ge...

If Cash App introduced brokerage services it would be over for Robinhood.

I got a cash card, got a generic undefined activation error and no reply from support. I eventually just shredded the card.

When I talk to friends for p2p payments, people mostly use venmo, then messenger & apple pay and nobody uses square cash.

Same. I send money over Messenger all the time to feiends and family. Southeastern US here.

I have everything in Fidelity which seems like it has the same benefits as Schwab, but also with the trading availability and zero fee index accounts (not sure if Schwab has this too).

I had simple for a while and the UI was great, app is best of the ones I've seen but they never had anything else (they recently created a savings account) and no checks got annoying to deal with.

My Bank of the future would have these features:

- Full brokerage account with available trading and zero fee index funds

- Free checks

- Free wiring/ability to send money to other people's bank accounts

- Really good app (like simple's)

- Decent interest like Robinhood has here without having to separate things into a savings account

- No fees

- Credit card to rival Chase Sapphire Reserve or AMEX Platinum with tightly coupled integration into the existing app software.

- All ATMs are free (rarely use, but nice to have and Fidelity does it).

- Ability to get loans

Fidelity has nearly all of these things with some negatives:

- App is not that great/UI is bad

- Their credit card is bad and not well integrated into their software

- Interest is poor

Haven is a new startup that's has a pretty cool approach to helping people do the optimal thing with their money (like an automated r/personalfinance), but I'd rather just be able to do it directly with the people holding the money.

They have quite a few zero fee index funds.

> Simple tried to reinvent banking, but they never seemed to go beyond polishing the UI.

I'd take another look at Simple. I've been with them since the beginning and their recent enhancements are fantastic! Expenses tied to your pay schedule that automatically set money aside, same with goals. and then the big one for me was an interest bearing savings account, yielding 2%.

See more here:

https://www.simple.com/2percent

https://www.simple.com/features/expenses

Honestly, Simple botched the transition from Bancorp to BBVA. I switched all of my direct deposit and bill pay back to the big banks, closed my account, and never looked back.

I wouldn't be surprised given their investor docs mentioning America, their £1bn valuation, and their current growth rate, if Monzo launched in the US in the next 12-18 months.

They are a definite contender for your list.