Hacker News Reader

Comment by runeks | Hacker News Reader

Isn’t a banking license mandatory for a company that offers financial services? And if so, why does it matter what else a company does as long as it lives up to regulations?

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.

View on HN

Perhaps we should start thinking about separation of powers such as modern democracy(eg separation of church and state).

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.

Good point. There's a precedent for separating industries when it's in the public interest [0]. I think the argument needs to be that housing both industries under a single roof creates a conflict of interest that's too strong to be managed through normal regulatory actions like fines.

[0] https://en.wikipedia.org/wiki/Separation_of_investment_and_r...

There's also a precedent for preventing companies with a monopoly in something from expanding into other businesses, like Bell. Clearly facebook isn't a recognised regulated monopoly like that, but there are similarities.

Right now it seems we are heading for the CHOAM company. (Fictional company in the Dune 'verse that does everything.) I've joked that Amazon is CHOAM and SpaceX is Weyland-Yutani (from Alien).

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.

How about then Amazon becomes the state, viola (sic) state controlled production, give everyone an equal share and we have Communism!

You joke but this is sort of what Marx actually argued. Revolutionary state dictated communism was mostly Lenin. Marx thought capitalism would evolve into communism.

We seem to have both trends concurrently right now: institutional investors push for clean sector separation, when they expect sector A growing they want to be able to buy into companies in that sector with as little baggage in sector B as possible and vice versa. Consequently, "the old tech corporation" (Siemens, Philips, GE) seems to be in a permanent state of shrinkage by spinning out one field after another. At the same time, "new tech" corporations are still growing faster than any sector purity investor agitation could keep up with, some even still under the control of founders so that the entirely different logics of personal empire-building apply.

This conversation has been going on for a little while already. Elizabeth Warren directly addresses proprietary markets (i.e. participating in you own) in her plan to break up big tech companies[0]. Her argument essentially boils down to either participating in someone else's marketplace to sell goods, or running your own marketplace without being able to transact within it, but preventing the ability to run and participate within a single market.

0: https://medium.com/@teamwarren/heres-how-we-can-break-up-big...

Which means steam couldn't be created now, which is a little disappointing

Not true, theoretically they'd just have to sell their own products on another marketplace.

Or offer them at a discount with little to no advertising, which is basically what they did with Orange Box.

Or split into steam-the-platform-the-company and valve-the-games-company - and if that happens I predict half life 3 really will follow.

They'd divest the resources into Apple Apps Co., which would then be a Apple preferred partner on the app store.

It's problematic because nearly every platform either grows out of an application or needs its sponsor to build the initial suite of applications on the platform. You can't get past the chicken & egg problem otherwise - platforms aren't useful without applications, marketplaces aren't useful without participants, and nobody wants to bother with a platform or marketplace that isn't useful.

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.

It somehow feels wrong to tell Apple that they can't sell Apps in their own App Store.

...which shows how ingrained the idea of oligopoly & big business is in the U.S.

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.)

We had a good "word processing and spreadsheet market". But somehow people and companies voted with their money for Microsoft.

No one liked Excel better than Lotus 1-2-3. They picked Excel because it worked best on Windows because it used private APIs and also because they would be sold together.

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.

If that’s the case, why couldn’t Lotus compete with Microsoft on Macs - even though they tried? Excel was a better product.

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.

There are some fairly strong cross-platform network effects between office software, because of file formats. If you had MS Word on the PC and wanted to send documents to a friend who had MS Word on the Mac - well, there were minor issues around disk formats, line terminators, and file transfer protocols, but generally if you had e-mail you could send them a .doc. If you had Lotus 1-2-3 on your Mac and wanted to send files to colleagues with Excel on the PC, you were screwed. (The major software manufacturers did end up reverse-engineering each others' formats by the late 90s, but by then Office had already won.)

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.

Lotus was slow to move any of their products away from the command line. Excel was on the Mac in 1985. Lotus didn’t come to the Mac until 1991 and when it did, it was awful. Microsoft had years of GUI development experience by the time Windows 3.1 shipped because they were producing Mac software. Lotus and WordPerfect were panned for their early Windows products because they were direct ports more or less of their DOS products, not because they couldn’t get access to super secret Windows APIs.

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.

So basically all grocery stores that sell their own branded stuff as well are blocked?

Not sure why this is voted down. Amazon is just doing a scaled up version of what Walmart, Price Chopper, Trader Joe's and various other supermarkets have done for decades. Why should Steam and Amazon be barred from doing it if others aren't?

No they're not. All of the grocery stores are engaging in "white-labeling" - buying products from other manufacturers and putting their own label on them. It would maybe be a valid comparison if Price Chopper took in 50% of all grocery dollars spent in the US, saw what was popular, cloned those products in house and then used the top 80% of shelf space to prominently display their product, and moved the third party competitors to the very bottom shelf.

Additionally, Trader Joes ONLY sells white-labelled products, so it is even less applicable than your other examples.

Thanks for letting me know.

> Additionally, Trader Joes ONLY sells white-labelled products, so it is even less applicable...

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.

Fair enough. They also don't slap a Trader Joes marque on the produce they resell.

isn't the line between white labeling and competing with cloned products blurry? How much of the manufacturing/creation process must they own for it to no-longer merely be a white label product? Lots of companies contract out manufacturing and it's not automatically white labeling in those cases.

You're right. I think the distinction comes down to companies like Amazon having the kind of vast capital required to not only cut out the middle man but to _become_ the middle man in their own market.

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."

No. From TFA:

"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.

Companies can easily get around this.

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.

It is not quite as easy as you suppose. The Bank Holding Company act of 1956 (as amended in 1970) places any company that owns 25% or more of a bank under the regulatory supervision of the Fed. The holding company rules for Broker/Dealers (investment banks and retail/institutional brokerages) are less airtight but not insignificant.

I worked on Wall Street for years, many of the them on the business side. Fed supervision is no joke.

This argument against vertical integration sounds a lot like United States v Paramount Pictures, inc [0], which forced Hollywood to end the vertical integration of the “studio system” [1].

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

> Perhaps we should start thinking about separation of powers such as modern democracy(eg separation of church and state).

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.

So Walmart wouldn’t be able to sell Great Value products. Same with Safeway for signature select. Amazon basics... Kirkland...

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.

The argument that vertical integration harms consumers typically follows that vertical integration lowers competition and choice by either coercive means (e.g. block pricing by Hollywood studios) or by undercutting competitors only until they go out of business.

I was under the impression that the EU outlawed such practices as part of their anti-trust laws.

So should Apple not be allowed to sell Apple products in Apple stores because it also sells third party products? Should the console makers not be allowed to produce and sell their own games in their own stores? Should Amazon not be allowed to both produce their own content and sell third party videos?

Many tech companies are also in the business of advertising. It seems clear to me on the face of it that combining an advertising company with a bank is a fundamentally bad idea and would be a clear conflict of interest. An advertising company that "knows where you click", serves you customized ads and has full access to your bank account information strikes me as a step too far.

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.

>An advertising company that "knows where you click", serves you customized ads and has full access to your bank account information strikes me as a step too far...

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.

I agree, those are both good points!

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.

Walmart doesn't own its own bank, but in Arkansas, I've seen this bank next to and within Walmarts:

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.

So by disallowing Walmart - that caters to a lower income demographic - from operating financial services, how is that going to help the same underserved population that the banks don’t want to cater to?

> 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.

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.

The problem is no company wants that as they would essentially be required to publicly reveal their entire web of business partners, which is generally closely guarded as a source of competitive advantage.

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.

Oooh nice. I see you have a large sum in your account, how about a new car? I see lots of cc charges from designer stores - have you seen this one? I see your regular paycheck from your employer have stopped...

Chase does this today.

> Isn’t a banking license mandatory for a company that offers financial services?

No, banking is a subset of financial services, and not all financial services firms are banks.

PayPal is a good example of a financial service company that’s not a bank.

But they need a license, right?

PayPal is a money transmitter, which requires a different federal license than a state or federal banking license.

Thats not 100% true. Paypal may very well own a bank, or at the very least cooperates with a bank, to stay in compliance with some of the services its offers.

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.

PayPal does not have a banking license so they must partner with banks to other some services. Similar to Apple offering 0% loans on iPhones with Citizens or loans with interests for Macs using a Barclay credit card.

While a little off-topic, since this is an article about the US, PayPal does have a European banking license: https://web.archive.org/web/20161122071031/http://www.e-coml...

There are many different sorts of financial services licenses both at the organizational and individual levels: banking licenses, broker-dealer licenses, investment advisory licenses, money-transfer licenses etc. From different federal agencies, state regulators, or industry associations. You can do certain things given certain licenses or be prohibited from doing certain things. Some licenses are granted to companies. Some to individuals. Plus, there are a blizzard of non-license based regulations covering a wide range of financial services activities.

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.

For whatever a banking license doesn't cover, requiring more regulation/oversight doesn't seem unreasonable to me, but straight up keeping tech companies out is silly. Smells like big financial institutions are probably lobbying to keep the new kids out of their sphere.

They know what they are protecting. The financial institutions pocket 20% of global GDP by providing very simple, cheap & easily automatable services, from a tech standpoint.

Banking licence is only needed when you're dealing with traditional currency, not when you are making your own currency. Starbucks card, digital game companies are all examples of a currency.

While I’m not disputing your facts, I’m curious how that lines up with the fact that (IIRC) gift cards are considered loans. That was the crux of how RadioShack argued that filing bankruptcy allowed them to invalidate outstanding gift cards.

No, because there are intermediaries that allow non banks to use their tech, like venmo/paypal acts as a broker, and therefore has access to all the banking services they need to run their money around. And they are very careful to stay in that definition so they don't have to deal with bank regulations. I believe Vice media did a good interview where they cover this specifically.

Reply on news.ycombinator.com