US proposes barring tech companies from offering financial services
cnbc.com
cnbc.com
If it’s problematic that a licensed tech company is offering financial services, isn’t there something wrong with the requirements for acquiring this license?
Seems to me that if Facebook lives up to the regulations, it should be allowed to acquire a banking license. And if there’s something problematic about this, the requirements for acquiring a banking license should be changed, and applied to everyone.
No, banking is a subset of financial services, and not all financial services firms are banks.
Financial services companies are often a complex arrangement of licensed and/or white-labeled services that are necessary to maintain compliance with regulations in the multitude of jurisdictions in which they operate.
I agree that even today companies like Facebook, Amazon and Google have way too much of this information already. A move like this may be the first step into teasing some of this data apart and, ideally, preventing one company from collecting it all.
Here's the thing though, you realize you just described Walmart right?
I mean, the HN crowd probably doesn't overlap much with the market that Walmart serves with their financial services, but it's actually a significant portion of the american populace. For them, Walmart is the marketplace, the ad firm, and the financial services provider all in one.
So what everyone's asking is:
1 - why is there no attempt to go after Walmart? or big finance?
and
2 - why are we doing this anyway, because what we really want is a HIPAA-like law criminalizing the sharing of personal data for commercial purposes? Such a law would be more simple, and would stop more privacy violating behaviors in their tracks.
These are very reasonable questions, given the assumed intent of the proposed legislation.
Ideally this legislation would also prevent Walmart from minting their own currency or opening up their own bank (conveniently placed in their stores and available on their website). My understanding is that Walmart is more like Amazon-plus-physical-stores at this point; they do not yet provide their own bank. If they did, maybe they could be cast as a "tech company".
IMHO, the concern over privacy is _my_ concern; I'm not sure it's something this piece of legislation is worried about. Based on the article it seems like the concern here is more about Facebook creating their own currency and less about consolidation of people's private data. I would guess no one in government likes Bitcoin much and it's one saving grace is it's lack of widespread popularity among the general population. Facebook could conceivable make Libra so easy to use that it could turn into a real thing.
https://en.wikipedia.org/wiki/Arvest_Bank
which is owned by the Waltons. They only seem to be in Arkansas though, which is less scalable than the entire internet.
A thousand times yes! I am a free market kind of guy and your proposal fits with that philosophy because while I might do business with <some credit card or bank> I am not doing business with their “partners.” And, the term “our partners” that come with the privacy policies is so nebulous as to be worthless. Does <some bank> have a partnership with a flower delivery service? Maybe, I have no idea and no reasonable expectation that they do. So why can my data be sold to such out of scope “partners” under a generic consent. I should have the right to consent to each and every specific partner that the institution wants to sell my data to.
This is the Great Asymmetry, as it were. They want to be able to invade your privacy and capitalize on your information, but will raise all Hell against being forced to reveal anything that could give anyone else a leg up on them.
Until this is reconciled via either a return to a non-invasive business environment, I.e. companies collect only enough state to do business with you, and the norm is not to data share, or companies are forced to explicitly reveal who they are doing business with in order to get explicit permission, abusive data harvesting/sharing will win the day.
While not directly comparable, it's imo a good place to start. Advertising companies perhaps shouldn't also be selling products (what's to stop them pushing their own product vs someone else's), social media vs banking (a SM can push their Bank, or similar service though we'll, that would be advertising wouldn't it).
This isn't a terribly well fleshed out thought, but hopefully a conversation starter.
[0] https://en.wikipedia.org/wiki/Separation_of_investment_and_r...
There do seem to be consolidation / de-consolidation cycles in business though. In the 1980s people also talked about the birth of EverythingCorps. You can see it a lot in 80s sci-fi. In the 90s you had the opposite trend.
0: https://medium.com/@teamwarren/heres-how-we-can-break-up-big...
This is pretty easily worked around with a revenue threshold, though. If you own a marketplace where $25 is transacted annually and you want to participate in it, go for it. If you own a marketplace where $25B is transacted annually and you want to participate in it, there're some problems with that. This is already part of Warren's plan.
There's nothing inherently wrong with forcing Apple to divest their in-house apps. They did it before, when they spun out Claris in 1987. Likely, it would lead to better competitors within those markets than we have now; there was a renaissance in Mac office software after Claris was formed, which unfortunately Microsoft won. Perhaps if Microsoft had also been forbidden from building apps for their own platform, we would still have functioning word processing and spreadsheet markets.
(Though remembering this time period, I can think of another problem: file formats. Having a choice between MacWrite, WordPerfect, Ami, and Microsoft Word was great. Having to share your MacWrite files with someone using Ami was miserable.)
My dad had quite a lucrative decade as a consultant moving people from Lotus to Excel, and every time he was hired the people hiring him would complain about how they were being forced to move to "crappy Excel" because of the purchasing department.
Just like people love to wear rose colored glasses and pretend that the only reason that Netscape lost was because MS was unfairly competing, forgetting that NS was so crashed prone that it was a point of nerd pride on Usenet how well an operating system could handle a Netscape crash.
If Microsoft had an edge on Windows, which was the majority of computers, then that would translate into inconvenience trying to use any non-MS product on Macs, unless everybody you dealt with used Macs.
As far as compatibility. By 1990, Apple/Claris had XTND/Apple File Exchange utilities to convert from Rxcel/Word to ClarisWorks. People knew Microsoft’s formats by then.
The Mac was its own little incompatible island back then with incompatible file formats between Mac Word/Windows Word (though they could be translated), resource forks and data forks, file types as part of the file metadata instead of file extensions, heck even text files used different line endings than either Unix or Windows. Mac users didn’t generally worry about seamless interoperability.
On the other hand, back in the day, Office could open every kind of document under the sun.
Additionally, Trader Joes ONLY sells white-labelled products, so it is even less applicable than your other examples.
Their mix is heavily skewed toward private-label products, but "ONLY" is not accurate.
To pick one example: they sell name-brand beer alongside their private labels.
In most cases, a market (in the specific sense, like a store or a site) will white label a product and undercut competitors by leveraging the volume/wholesale pricing that they can get. What's truly dangerous about the AMZNs and GOOGs (and Standard Oils and Ma Bells) of the world is that they can use brute monetary force to buy or subsume competition. To quote the legendary SF grifter Jack Black, "You can't win."
"First, by passing legislation that requires large tech platforms to be designated as “Platform Utilities” and broken apart from any participant on that platform.
Companies with an annual global revenue of $25 billion or more and that offer to the public an online marketplace, an exchange, or a platform for connecting third parties would be designated as “platform utilities.”
These companies would be prohibited from owning both the platform utility and any participants on that platform. Platform utilities would be required to meet a standard of fair, reasonable, and nondiscriminatory dealing with users. Platform utilities would not be allowed to transfer or share data with third parties."
Note the word 'tech platform.' TFA also goes on to illustrate that this effort is essentially identical to trust-busting that has occurred multiple times over the past century when a single company became so large that it distorted an entire market.
Instead of Facebook opening the Bank. It'll be zuck first banking national forms a partnership with Facebook Inc. Accomplishing the same things.
Only accomplishment will be that it's harder for the two companies to share their point datasets. Albeit, not impossible.
I worked on Wall Street for years, many of the them on the business side. Fed supervision is no joke.
Honestly, I’ve wondered if Apple has deferred manufacturing to Foxconn et. al. just to avoid being ruled a (vertical) monopoly with this precedent.
[0]: https://en.m.wikipedia.org/wiki/United_States_v._Paramount_P.... [1]: https://en.m.wikipedia.org/wiki/Studio_system
I think it should be in a complete different way: finances should be separated from the state so new financial initiatives based on tech (e.g. Libra, Crypto assets) can be free in the same way that Internet gives us freedom to create decentralized initiatives that cannot be stopped by states.
This does not mean that the state is not able to enforce laws against the financial or technology scams in the same way it has laws against pedophilia that cover what church members do.
I don’t think banning vertical expansion is a very good idea. It’s worse for consumers because you’re taking all of the extra efficiency gains out of the market by eliminating the friction between layers.
It's not necessarily problematic that a tech company gets a license. But I think that some services require that officers of the company have specific licenses, which may be an issue. Or that the company have certain safeguards in place. Or certain communications (or communications blockage) structures. Etc. The regulations are fairly complex and intensive -- I suspect even many larger tech companies would be leery about entering this minefield.
I think this may be a knee-jerk reaction to the rise in crypto-currency adoption, and Facebook's launch of Libra.
Rethinking it, this could also be taking aim at Amazon.
Sometimes, vertical integration can be a good thing, because for some spaces the alternative requires so much coordination that it's awkward and clumsy. If you look at Tesla's supercharger network, for example. The very fact that there are no really serious competitors yet that are not tied to a specific brand of electric car demonstrates how lack of vertical integration can be a major impediment for chicken-and-egg-type problems. And while I'm sure there eventually will be, just having Tesla out there in the forefront is useful as a leading example.
Why wouldn't they just look at regulating the product side (ie the actual services like crypto currencies) on their own merits and not discriminate against who provides them?
”Moxy...will be a technology company that just happens to fly airplanes”
https://www.dallasnews.com/business/airlines/2018/09/21/moxy...
FANG aside, I feel like purebred tech companies are more likely to deliver what people want as opposed to existing financial institutions that are interested only in keeping up (in the ultimate minimal sense) with what other companies show is possible.
I once worked at an online college that claimed to "not be a tech company". I replied, "if your website goes down then where will people go to take classes? How will professors interact with students?" They didn't get it.
“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,”
Its specifically targeted at currencies (libra and perhaps things like xbox points?). Not all financial services.
This type of service flies directly in the face of the Google and Facebook's business models, there is absolutely a good reason to fear how these advertising giants will abuse customer financial data. These services MUST be kept separate for the health of society.
On a personal note, Facebook was just used to overthrow the democratic process in the US and the UK, possibly in other nations as well. They certainly need to demonstrate the ability to control their existing products before they are given even greater responsibility.
I love what David Marcus is doing and the idea of a crypto currency can do the world a lot of good. But not in Facebooks hands or in the hands of any other advertising giant.
look, government, namely the politicians, all truly upset that the facebooks, google, and more, of the world, give anyone the opportunity to get a message out. decades ago the politicians could reliably count on the press of their nations to always pony up.
they have lost control of the message mostly, they are trying to claw it back under the guise of protecting privacy , elections, children, and puppies. they damn well will get in front of any attempt which could affect their control over any means of wealth transfer. even regulated and taxed they would lose manipulation of currency to implement policy.
And what, precisely, is a tech company? How is that unambiguously defined?
> The draft legislation, “Keep Big Tech Out Of Finance Act,” describes a large technology firm as a company mainly offering an online platform service with at least $25 billion in annual revenue.
You're not going to compete with Venmo, PayPal and Libra with "same day if I get it in by noon"
ACH goes through the FED before it is processed by the receiving bank. Is SEPA sent to the ECB before clearing?
I’ve worked in Fintech for 6+ years. Banks are dinosaurs and the US banks are terrible at adopting new processes/tech.
In the US we are in a standard war with ACH, Zelle, and other payment schemes fighting for market share.
Companies with an annual global revenue of $25 billion or
more and that offer to the public an online marketplace, an
exchange, or a platform for connecting third parties would be
designated as "platform utilities."
Robinhood is reselling financial services from another registered financial institution.
There’s a lot of money on the line.
Really? Because I was under the impression that they're more worried about companies minting "currency".
Libra is not a threat as long as Facebook plays well with regulators and various nations’ tax offices. In addition, Libra will be run by a spin-off company, not directly by Facebook.
Apple is potentially going to cut EMV out of the loop.
Think about it, why are we targeting tech? If having tech mix with finance is bad, shouldn't we disallow finance companies from offering tech services?
If it's not bad, then why are we doing it at all?
This really sounds like these politicians are once again doing too much of something no one asked for, and nothing at all about what we did ask for, privacy protection.
All they need to do is make a HIPAA like law that criminalizes any sharing of personal data at all for commercial purposes. With mandatory prison sentences for offenders. That's it. Do that and you stop all kinds of egregious privacy invasions in their tracks.
That's a really simple ask, and yet they won't do it. It's starting to get a little infuriating. No one cares about whether paypal or ebay offer a prepaid debit card or whatever. Anymore than anyone cares about Walmart offering prepaid debit. We want to make it illegal for ANY of these companies to share information. Full stop.
Why can't these people do such a simple thing that makes a whole lot of sense? The EU has protections. Even the AU has started drafting the privacy protections regs for their new zone. Why can't we in the US do that same, very simple, thing?
Worst part is now instead of having to worry about what ebay, paypal, and amazon are doing with that data, I have to worry about what thousands of anonymous smaller vendors are doing with my data after they purchase it. In a very real way, these politicians are turning what was a 9mm round flying at me, into a shotgun blast...
and then saying, "Hey don't thank us!!!"
Don't worry I won't.
Less threat of competition just means their margins get to stay high. I'd rather be looking for ways financial regulations can encourage more players to enter the market.
Is this true? I would assume Republicans are more interested in protecting big bank interests
Remember though, the above is the generalization of one significant group of republicans. There are many different (overlapping) groups with different beliefs.
“Small government” is rhetoric Republicans use when Democratic priorities for government (social services, etc.) are being discussed; it evaporated when Republican priorities for government (military, law enforcement, etc.) are discussed, and even when Republicans have full control of federal policy you don't get smaller government, so the idea that they are for it in any way other than as a occasionally-convenient rhetorical dodge around discussing particular issues is not well supported by evidence.
I'm sorry, but no. Republicans are republicans the same as Democrats are Democrats. These parties have their own priorities and most votes fall along party lines anymore.
you could switch out Republicans for the word Conservatives and it would be more accurate.
I believe you are talking fiction here. They don't institute small government when in power because the campaign rhetoric about small government that they use to get elected is completely infeasible. Add to that that there are usually many forms of spending which would be controversial to their campaign rhetoric were it logically consistent, but they like.
I humbly suggest I have been watching this trend for decades and am not confused about this disparity. The voters you are talking about by and large get suckered in by infeasible promises. Sometimes the elected officials are true believers who only fail once the reality of the situation sets in. Other times it's active deception.
I think the difference is if the financial component is the product. All of those things, Steam wallet, Ebay, etc. are all trying to use the money moving tools to sell products that aren't money. Your Steam wallet cannot be used to give someone $20USD who can then go spend it on Pop Rocks. Ultimately it all funnels into buying games.
When your product is the money storage, transfer, removal services, that's when you become a "financial service."
Perfect example of politicians giving us truckloads of junk we never asked for, like this "Keep Big Tech out of Toilet Paper Printing" or whatever, while at the same time giving us absolutely no part of what we do want, privacy protection.
That seems very different to me from how advertising companies function and make money.
So, I've been working fairly intimately with HIPAA for close to 20 years, and I have to ask: on what planet can a law both be “simple” and “HIPAA-like”, even if you are only talking about the original 1996 Act and not all the subsequent additions?
> No one even tries to wiggle or weasel out of HIPAA violations
Yes, they do (well, for privacy violations, not, say, the Administrative Simplification side, but only because that side isn't enforced with any seriousness so they don't need to bother.) That's why we got things like HITECH to make that harder.
[...]
> The regulatory affairs people at most medical companies are FDA compliance experts that know how to comply with HIPAA, rather than HIPAA experts that some how penetrate the FDA requirements.
Well, yeah, the Health Insurance Portability and Accountability Act of 1996 is centrally a law regulating insurance provision whose rules and regulations most significantly impact payers; the parts impacting providers (while there is some compliance effort required, particularly regarding privacy and security) were actually designed to reduce the burden on providers; the privacy/security elements of HIPAA were included to mollify fears about the incentivizing and standardization of electronic billing transactions, they aren't the central focus of HIPAA though they are the part that (now that the “number of the beast” fearmongering has faded) remains in the public consciousness.
EDIT: And even then, the HIPAA privacy rules aren't all that simple; if you want simple privacy rules, the rules for privacy of federally-funded drug and alcohol treatment patient data are much simpler, and also stronger privacy protections.
Some states prohibit fees while others require the breakage to eventually go to the state itself.
"Loyalty" rewards that are 'earned' or awarded are less regulated. Hence the airlines miles that expire.
Define large, platform, and utility please?
They do define large as 25bil.
This definition has serious issues if nothing else.
Governments need to take a look outside their bubble and see that they are loosing power to global companies.
Look, I know Hanlon's razor and all, but thinking that there's no complicity between the US government and US companies (you say global, I say US because FAMGA, in this case) is wishful thinking.
GAFAM rolls off the tong a little better and what the french use (pretty funny article about them on the french wikipedia [0])
Clearly they want to apply rules to a specific company, but it would be too crude to say "FANG" and create criteria that apply only to the "FANGS".
“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,” it proposes.
I'm assuming that implementing a wallet is not part of operating the currency.
That said, given the path that technology as a sector has taken to censor and deplatform people based on their political alignment, I'm not sure I'm really supportive of any potential currency exchange that does not stay out of any discussions of legally protected speech. I don't agree with most of those that would be cast out, but potentially not being able to pay for housing, utilities, bills, taxes or buy food is a pretty big deal.
Anyway, the quotes in the articles are so vague that they have no chance or regulating anything.
Sears -> Discover (founded) H&R Block (located in stores) Dean Witter (acquired) Allstate (founded)
https://www.scribd.com/document/417056845/Keep-Big-Tech-out-...
For comparison, MasterCard's annual revenue is $12.5B.
Startup culture has demonstrated that they are uninterested in following and very interested in subverting long standing regulations that exist for good reasons.
It's not clear how to solve this problem, and there's a certain quasilibertarian bias that legitimizes it, as the federal register is incomprehensibly large, such that only long established networks of expensive lawyers can wrangle it, which stifles innovation.
The difficult part, however, is making the case that innovation ought to happen in this space anyway.
Do you have evidence that they exist for good reason? It seems to be central economic planning, based on the delusional idea that cookie-cutter rules designed to regiment every class of interactions will preempt misbehavior and promote socially beneficial behaviour.
The opportunties for special interests to stifle competition with regulations are replete, so there are many explanations for regulations existing besides their being in the public interest.
Tech companies like Google or Facebook are actively trying to shape your opinion. Must have been an ingenious move they made to look worse than Wall Street in a few years.
edit: The unpersoning they have committed isn't a viable strategy in the financial industry. Even if players like Mastercard have fallen into that trap. But I wouldn't trust them with a penny.
In other words, the proposition to bar tech companies from offering financial services is a joke. How can you tell what a tech company is? Every company uses tech in some way shape or form.