Stripe can make automatic LLCs but a wire transfer from Citi nearly ended me
abe-winter.github.io
abe-winter.github.io
Edit: also worth noting is that a significant portion of a large bank's customers are over middle age and still want high-touch in-person and phone interactions in a financial institution.
Disclaimer: I work in financial services. If you want the plumbing fixed, lean on the Fed and the banking industry as a whole through Congress. You’re delusional if you think you can fix this with a startup (see: BankSimple and Standard Treasury). The industry inertia is overwhelming.
Easier and faster to just give up preemptively.
This due to the simple fact that banking infrastructure is a super complicated pot of badly combined standards created before the internet really existed, and equally complicated regulatory requirements that don’t map well onto the technical standards.
This works quite well in the stock market, so why is banking so different?
My guess is that it's regulated like crazy, so maybe simplifying those regulations would be a good idea. I'm not very well informed on the particulars of those regulations, but I have looked into building something that involves financial data and it's far more complicated that it needs to be. I should be able to automate money transfers just as easily (if not more easily) as doing stock trades, yet the opposite is true. It's needlessly complicated and expensive to get anything done.
Most of those regulations are in there for either a.) FDIC compliance to make sure there's enough liquidity in the case of a run (aka the "don't repeat 1929" rule) b.) anti-fraud/money laundering c.) because ACH rules are still there for a ton of legacy reasons
The stock market is volatile because it assumes that those investing understand the risk involved. Bank accounts on the other hand should, really have to, be super stable. Treating liquidity like the stock market means a bad bet by the bank managers and everyone loses their college fund.
> I should be able to automate money transfers just as easily (if not more easily) as doing stock trades, yet the opposite is true.
The reason is because of money laundering. Despite how bad it seems the US has the best anti-money-laundering (AML) rules in the world and yea, this causes friction, but it's what's necessary.
Eg FDIC makes depositors not monitor their banks' riskiness. So they piled in other regulations.
The worst offender in the US used to be unit banking requirements, ie branch banking was all but verboten. So most banks used to be horribly fragile, tiny, single branch entities.
It's impossible for depositors to do this. It's almost impossible for national banking regulators to do this, but at least they're in a position to try.
Deposit insurance is a requirement for a functioning system. You cannot ask ordinary members of the public to shoulder the risk for the system.
There were very successful banking systems without deposit insurance. Less crisis prone than our current systems.
I can provide some sources, if you are actually interested.
See eg https://www.alt-m.org/2016/08/12/capital-and-cash-reserves/ but I can look for something more appropriate:
> Of course, not all banks catered to depositors whose primary interest was safety: there was a market for riskier bank deposits also. But, despite what apologists for central banking and deposit insurance claim, it was not especially difficult to tell safer banks from less safe ones. The problem in places like the U.S. before 1934 and England before 1826 was not so much one of distinguishing relatively safe banks from relatively risky ones, but one of legal restrictions that prevented well-capitalized banks from emerging in many communities. In the U.S. the restrictions consisted of laws preventing branch banking; in England they consisted of laws preventing English banks other than the Bank of England from having more than six partners. (In 1826 other public or "joint-stock" banks were permitted, but only if they did not operate in the greater London area–itself a major limitation; while in 1833 other joint-stock banks were admitted into the London area, but only provided they gave up the right to issue banknotes.) These regulations limited the capitalization of U.S. and English banks while at the same time limiting those banks' opportunities for financial diversification–a recipe for failure. In both instances the regulations were products of politicians' catering to rent-seeking behavior on the part of banking industry insiders. Yet the resulting, unusual frequency of bank failures and substantial creditor losses stemming from such failures helped to sustain the belief that fractional reserve banking could only be made safe by means of further government intervention.
> Where laws did not prevent banks from diversifying their balance sheets, especially by establishing widespread branch networks, or from securing large amounts of capital by "going public" (or, in the case of some Scottish and most Canadian banks, by making shareholders liable beyond the par value of their shares, which from creditors' point of view is equivalent to having more capital), bank failures have been relatively less common, and losses to creditors stemming from occasional failures that did occur have been relatively minor. Indeed, even such a spectacular failure as that of Scotland's Ayr Bank did not ultimately prevent the bank's creditors from being paid in full, without need for any sort of bailout.
If you want government guarantee, you can already invest in government debt.
All attempts to use it for non-crime-related payments have failed so far, because of its slow speed and huge transaction costs.
And in a spectacular turn of events, it may be a worse polluter than any single American car company as well. I bet Satoshi Nakamoto didn't plan for this one, eh?
I had to ask the bank. I don’t see how else I was supposed to go about my payment when I was asked to send a check.
In some (if not all) European countries we don't have checks any more. Someone just gives you a bank account number, you wire a transfer, and it's at the recipient within a second to a day at most. The transfers cost between €0 to €0.5, regardless of the amount.
I was on a date a few days ago, a girl really wanted to pay for herself, but didn't have the cash, so she asked me for the bank account. I gave it to her via messenger, she wired me €30, it landed on my account instantly, to which I said that this is too much, and wired her €15 back. Yes, seriously :)
On the other hand, things like venmo and the cash app are ubiquitous. I just went to lunch with a friend, forgot cash, asked him his phone number and shot a venmo for half in 10 seconds.
So luckily we have some services that are filling the shortcoming of our banking industry..
It's clearly possible to create a bank transfer facility that works quickly for zero cost. How come they don't?
Checks have always been a major source of fraud. The rest of the world stopped using them and feels no need to go back. How come the US still uses them?
Some of the early presidents where totally against having any central bank at all
From some quick research there is approximately 6,799 banks in the US and 5,757 credit unions. That's over 12,500 entities that need to communicate with each other. It takes a massive political will (not to mention money) to update the legacy federal systems that tie it all together.
Here's some more information: https://www.npr.org/sections/money/2018/01/10/576879734/epis...
The UK has "over 300 banks" by comparison.
I'm guessing USicans just don't realize the world has moved on. Large countries tend to be isolating and the US is no exception.
We know how better it is in other parts of the world, we aren't dumb.
With regards to the credit card payment, my guess would be that it went over a dual message system. Which means one message reserves the money, and a second one moves it.
This is important because the first message will generally cause the payment to appear on your statement, and reduce your “available balance”. But doesn’t impact your actual balance. The money’s still yours so you earn interest on it, but you can’t touch it.
When the second message turns up the money moves and the transaction completes (sometimes called “posting” or “clearing” or “presenting”).
However if the second message never turns up (or a reversal is sent instead) then the money doesn’t move, it’s just un-reserved.
How banks represent this un-reversal is usually very confusing. Either the transaction simply disappears or a back dated transaction appears. This is because from the banks perspective the transaction never happened (it didn’t present, so no money moved and thus no transaction).
ACH is also a very strange payment scheme. I believe that debit ACH messages simply pull money from a bank account. The bank can’t stop this money movement (they always to have pay the bill or get disconnected from the ACH network). However in the case of fraud, your bank can send a message and claw the money back within a certain time span.
All of this sounds ridiculous and is a result of history. But replacing it would require hundreds or thousands of banks to agree a new standard, and there’s a good XKCD about new standards.
The customer should be able to query "what happened with this transaction" from their account and get back a graphic of what's going on. That information is useful to fraudsters, though; some states are more vulnerable than others.
But why does it work within the same day (or partially virtually instantenous) with SEPA payments 1) between banks in different European countries?
Why isn't there such a thing as IBAN 2) outside of Europe, which really helps to make bank transfers seamless and unambiguous?
It sometimes seems that regulation and standardization is not such a bad thing.
1) https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
2) https://en.wikipedia.org/wiki/International_Bank_Account_NumberThe Brazilian banks got their hand forced into changing their system recently, but this one feature stayed exactly the same way.
Hell, if you take enough details out, it is exactly the same as a two passes commit we use in distributed databases, where there is a single team (often a single person) defining the behavior.
Don't expect that one complexity to go away any time soon.
Many payment schemes were built with idea that messages would be sent via post (on big tape reels) or expensive internet connections that can’t be run 24/7.
However none of these constraints really exist anymore. Which means that you can move money using a single message and synchronous communications, with a little protection to deal with the two generals problem.
These systems have to be up and running all the time and there can't be an option for mistakes!
Single message systems already exist, most US card transactions move over a single message system.
> there can’t be an option for mistakes!
This is where you’re wrong. Mistakes happen all the time when moving money, a big part of any banks operations is cleaning up those mistakes.
Around here the banking authority started development on new ACH features (4 hour transfer, and they are developing "instant" transfer, and hopefully 24/7 transfer too), and the banks have to get on board in 1-2 years. (There's a deadline. Sometimes it gets extended because too many banks fuck up, but they get fined. It works up, progress happens.)
So, it's very, very, very far from impossible. If there's political will, it can happen in about 1-2 years.
Yes, it’s called an authorization hold or approval hold. The customer’s bank returns back with an authorization code or approval code reserving a certain amount of money. Then the merchant goes back with it to retrieve the amount actually wanted.
This is for situations like filling fuel, or hotel stays, or car rental where the final cost is not known at the beginning of the transaction, so an estimated amount is placed on hold, and then whatever is used is actually taken.
They’re still old and have plenty of issues, just different to the US.
Not even close. In the states things just feel and work as if you've jumped 15 years back in time.
And I'm not even going into identity theft territory which is orders of magnitude less common in Europe.
I know americans don't like hearing this and always downvote me into oblivion, but it's the truth.
This time won't be any different, but maybe someone will be exposed to an alternate reality and reevaluate their biases.
Why the hell are we writing checks in 2020?
The only thing that keeps it from happening is lack of political will.
And seriously, why the downvotes? Who is here actually defending the US banking system? Speak up!
Maybe awareness is improving...
Plus after a while it just gets annoying to be punished for just stating reality.
What awesome features am I missing out on?
The ability to limit the frequency and amounts of direct payments. Pay for cable with direct deposit? Why allow the company to debit more than a hundred a month?
You miss Banks giving you virtual on demand credit card numbers for free, not as a service you have to pay with another company.
You miss by having anything years later than everywhere else, like nfc payments and contactless card payments. I had people think I was insane 2 years ago for paying with a contactless card. Many would think I was defrauding them in some way. This was in large cosmopolitan cities. Not the sticks.
You miss free transfers without the ridiculous low amount limits Zelle has and no restrictions on whether the recipient is a business or not.
You miss the ability to have all direct debits initiated by you on your home banking. Meaning someone having your account number is never a real issue.
And the list goes on.
I don't get why you'd use something like that. Due to new EU regulation I can transfer money to other Dutch banks within 5-10 seconds. It should be EU-wide, but it seems the Dutch banks would some loophole to delay that. Anyway, what is the point of a cheque? Just pay immediately, this ensures your balance is way more accurate.
In the USA checks have your account number. A number you are supposed to keep secret to prevent ACH fraud.
The first thing Banks ask you if you try to address any fraudulent transaction is whether you've shared that number with anyone.
The number that is in every check!
It's insanity.
It runs much deeper.
Most of these functions are 'middle/back office' for the bank, they were never seen as important. The 'Ops' part was always just operational labour, things done by 'workers' etc.. It's not 'banking' to the banks.
Software at banks often parallels archaic processes, established for some very good reason long ago, but continue to exist only due to incumbency or possibly due to regulatory requirements.
And because it's finance, the security and stability requirements are much higher, giving new meaning to 'break fast and new things'.
When you add in the fact banks are incredibly incumbent and resistant to change, you get a Kafka-esque web of bureaucracy, inefficiency, arbitrary complexity etc..
I don't see any consumer oriented, 'Stripe-like' modern bank taking over either.
It's a user experience thing. People sometimes go into a bank knowing exactly what they want. More often, people don't really know what they want. i.e. they know they want a savings account, but they don't know if they want a 529 or a roth ira or just a money market checking account. You can think of bank branches like stack overflow: when someone asks "how can i do X" the answer is often often "do Y instead." Most people aren't taught financial literacy, and it varies over time and by geography.
Also, most of the population isn't as comfortable with technology skills in general, which developers and professionals often overestimate.
For commercial or investment banking (where banks make most of their profit) it's a whole 'nother story, but the author was trying to deal with consumer / small business stuff seems like.
I've recently switched between banks and done just what you said: I went in to a branch knowing roughly what I wanted, but unsure exactly how to setup it up.
The end results was _months_ of back and forth. The agents in person or in call centres did not know answers to fairly simply questions (can I have an overdraft on an offset account) and were unable to answer questions about applications (my credit card application continually gave me notice online saying 'proof of other funds required', no one was able to tell me what this meant our what I had to provide).
These problems are not related to the deep legacy issues of interbank transfers and settlement or fraud.
They are failings in organisational design and management, information design, customer service design. I'd guess they are a symptom of continuous churn and restructuring, of flipping from in sourcing to outsourcing and back again.
They are all problems that are within their power to resolve (yes, at great cost )
Just yesterday I was chatting with my manager about the “legacies that never die” which dramatically multiply complexity and spread the teams even more thinly...
This is approximately the level of understanding that most people have. I think this helps highlight the point that the banking system is just horrible to have to deal with -- you shouldn't have to know the intricacies and oddities of the banking system in order to do this sort of stuff.
> and still want high-touch in-person and phone interactions in a financial institution.
This is me. For mundane things, I prefer an automated system. But if anything at all goes wrong, or if I'm doing something unusual, I want a human to hold my hand.
Banks and financial institutions are set up to detect fraud in ways which will tend to spot 'unusual' behavior and anomalous patterns.
The combination of someone who is technically competent to the point that they use seemingly different behaviors to the typical user population and are taking actions which have traditionally been seen as high risk (wire transfers, transactions from new accounts, ...) is going to lead to automated flags being raised.
A wise implementation will avoid feedback loops, introduce human review which assumes the best unless clear evidence of fraud is present, and will provide mechanisms for individuals to clear/restore their status.
The latter resolution workflow, unfortunately, introduces further risks, especially if implemented halfheartedly. Training individuals that it's OK / expected to provide additional personal details to use a service ends up leading phishers to attempt the same techniques, and simultaneously creates a high-value target database of personal data should any of that information be stored long-term.
I don't know clear answers here - and yes, perhaps the author could have taken a more gradual or slower approach in order to avoid some problems, and maybe they are angry based on things about the financial system that they don't understand.
But there is an ongoing and serious problem here with the way that we provide access to systems and services and then attempt to remediate concerns via automated means.
Source: am European and have lived in the U.S., thus have experienced being 'unusual' to many U.S. financial services, have experienced not understanding systems in a country new to me, and have also worked in fraud and care about computer security and overall freedom and safety.
Also having a card doesn't mean it's your card, that's what the personal verification is for.
How does a wire transfer “put the risk on the banks”?
With a wire transfer, the sending bank earmarks funds and moves it to a special account. Once the central bank confirms, the destination bank takes money out of their account (this is where the delay occurs, as sometimes the bank must setup a repo with the central bank) and sends it to the recipient. If the sending bank where to fail, the recipient still has their money. Now its up to the sending, central, and destination banks to duke it out for the money.
I am referring to US wires in this case
Having run a business, 6 figure amounts are routinely moved via ACH. Some banks make it hard for consumers to send money to a random person’s account via ACH, but within the US, it is always possible and is literally how most companies pay their employees.
It was a bug in my use case but now I understand.
A "wire transfer" is the thing you pay $40 for, and is immediate and irreversible. Individuals probably only ever use it when buying a house. (Within the UK, this is called a CHAPS payment.)
I'm a millennial. For some banks I vastly prefer phone interactions just because their customer service is so fast and awesome; little to no hold time needed. Calling Discover Bank or Schwab has always been this pleasant. I've even become so lazy that I'd just call them to ask for a workaround for their UI bug. The same cannot be said for most other banks, like Bank of America. If I discover a bug on their UI, I'd rather get into the software engineer's problem-solving mode and figure out a workaround by myself, assuming Googling the issue doesn't work.
> I think the root cultural cause is an aversion to self-serve flows.
which is plainly false given the biggest push in the past decade of banking has been self service flows that allow them to cut costs and downsize branches.
Stripe is built on a traditional bank partner. The workflows Stripe optimizes are not “make it easy to empty my new bank account with minimal authentication” workflows.
Also the author thinks that buying a bank will solve things. This is also naive. Either you are not a regulated owner and you are severely limited in what influence you can have on the bank, or you become a banking group and banking regulations apply to you too.
The solution is competition, but regulations have made it so expensive for a new player that there isn’t really any. That’s the cost of you not having to worry about whether the money on your bank account will still be there tomorrow. Then in absence of competition, it is pretty horrifying how laziness and incompetence can cripple a large organisation to a quasi standstill.
> That’s the cost of you not having to worry about whether the money on your bank account will still be there tomorrow.
That's too high a cost. The eg Scottish banking system of the industrial revolution and the Canadian banking systems of the 19th century had this piece of mind in practice _and_ plenty of competition.
See eg https://www.alt-m.org/2015/07/29/there-was-no-place-like-can...
To my mind, it seems like banks are competing for consumers, they're just not competing using the kinds of gimmicks that techies want: mobile apps, powerful APIs, faster money transfers.
Honestly, I'll take $300 cold hard cash over a flashy iOS app any day.
Of course they can still be absent tomorrow.
That maybe true today, 30 years from now those boomers will be dead.
>>The other misconception is why banks continue to operate this way, which I personally believe comes down to prioritizing risk aversion and fraud resistance over other attributes
There are many ways to solve for both, other nations have done it successfully
ACH for example is a shit show and should have been replaced decades ago, its biggest "security" features is that fact that it is slow to complete a transaction to allow humans to catch an error or fraud....
US banking is not about risk aversion or fraud control, it is about risk shifting and CYA. They do not care about preventing fraud, they care about making sure they do not have a pay for fraud by shifting liability to either consumers, businesses, or another bank
If a fraud detection system is known to detect false positives (and they're designed that way on purpose, to provide a better protection to the institution), then there should be measures in place to contain the possible damage to clients, and also an easy procedure for clients to resolve these issues quickly and painlessly. That's a bare minimum. One of the main reason why people moved to Stripe from PayPal and similar services in the first place (beside an api that works) is exactly this type of problems where payment gateways would block your money in the name of some arbitrary "fraud risk" and you couldn't do anything about it. Fraud is their business problem, not mine as a customer. If I'm doing business legally why would I need to care or know anything about it?
If you don't understand any of these issues, the bank's behavior will seem willfully incompetent and spiteful, and raises some of the feelings expressed in the SP. But you won't find it different at "new tech" bank.
Yeah it will. Unless the bank communicated with you or could tell you what's going on, which apparently they are unable to. As this article illustrates perfectly, the problem is exacerbated by how frustratingly difficult it is to find out what's happening or the fact that seemingly no employee of the bank that you can talk to has any idea of what the issue is.
It's not about fraud, it's about money laundering. They often look like the same thing.
I have only needed to visit a bank in person once in the last 5 years or more, and that was to deposit some old US $100 bills which modern ATMs did not recognize and the local credit union did not want to take the bills ( I am not a member of local CU but it has an ATM I can use for deposits with my out of state CU).
Which reminds me, to fix that issue I signed up for a Chase account online, drove down to the bank 5 minutes later and deposited the $700 pre-1980s cash to a teller, who verified the bills were real without any griping - they have the right machines and tech to be confident about those things, unlike the local credit union. So, I guess, on a surprising note I had a good story about Chase to share.
They also gave me a few hundred dollars bonus to open a checking account, which was cool.
* Anti-incumbents in large industry
* Poor customer experience / hit piece
* The new tech company does it much better
* Doesn't try to understand the intracacies of the industry being criticized (wire vs. ACH???)
I know very little about banking and even I know (roughly) the difference between ACH and wire. My point is not that the author lacks intelligence, just that they should, as other commenters point out, try to learn about banking before you're so quick to criticize. I think us programmers suffer from thinking "this is all too complicated, it could easily be done simpler and better." That's not always the case and it can help us to understand how the current system came to be before making these judgements.
Cosign. I worked in healthcare for the better part of a decade and spent just over five years of that doing data interchange (mostly HL7).
It's always somewhat amusing when threads about it pop up on HN because it almost invariably winds up with smart programmers insisting that these have to be simple problems that would be easily solved if only we were using the right API, while having zero understanding of the business and regulatory requirements that, in reality, make many of the things attached to it very difficult to get right in a field where you literally have the potential of killing somebody with a severe enough mistake.
Because they are. Make the common case fast. There is no reason to expose all possible complexity to every transaction.
Hint: addressing that is exactly what HL7 has been doing for over 30 years.
The easy parts are easily solved because they're easy, and the easy parts are 90%+ of any given integration.
Those remaining hard parts are where the time and effort goes, and a lot of them are very fundamental things that seem easy until you try to actually do them.
"Simple" things like ensuring that you properly match a patient to their preexisting medical record are incredibly fraught with unexpected complexity that you can't handwave away with an interchange format.
It's a silly example, sure- all I'm trying to say is that there are usually a few pretty good reasons why "the solution is so simple, just do x" comments haven't already been implemented and the commenters don't usually have the context to know that. It's been my experience that a lot of problems with seemingly simple or obvious solutions haven't been solved that way for good reason.
In reality it’s massive monolithic slow moving orgs that data block, create black boxes, have poor documentation, and just generally don’t want to move forward.
Specifically I’m referring to EHR vendors and other legacy systems. Not necessarily providers or even payers.
When I lived in the US I asked my bank for documentation on how their stuff works.. I've done the same in Denmark.
I've never been able to get authoritative documentation that explains IBAN, routing/account numbers, transfer types, checks, signatures, credit/debit cards, etc.
I'm effectively left guessing, my bank can't even tell me if a given kind of number is secret or security sensitive.
How do you find out? Where is the authoritative documentation? The man page? The RFC?
The one thing to remember about retail banking is that it is highly regulated. There might be restrictions on visibility. That means that different support groups can see different things and only those things.
Learning about the current system is likely to make outsiders more, not less, judgemental ("how has it been so bad for so long?!")
I worked on a product a few years ago that would have turned our sales-led product into a turn-key hosted solution - just supply your credit-card and go. It was nearing deployment with 7 figures spent on development when the sales team got wind of it and immediately killed it.
Although I believe that the product would have been successful and brought in more money to the company as a whole, it would have gutted the performance bonuses for the sales team by bypassing a whole department. This could not be allowed to go live.
That is why real innovation tends to come from newer, smaller companies.
Collective bargaining can actually make things better by reducing labor unrest and allowing for industry wide coordination such as greater investment in training or German style Kurzarbeit during periods of low demand, where more people keep their jobs but their hours are cut.
Unions often are negotiating to not get lower wages: owner has bumper year, offers below inflation pay deal ... unions can say that is not good enough.
Without unions workers have no leverage, owners and politicians have all the power.
Or, could someone give examples of price increases due to unionisation [where no-one was taking a profit]?
Or can you give examples
I agree with you completely, except owners currently take a disproportionate slice of the pie. That is the cause of wealth inequality -- the power of unions to demand a bigger slice of the pie ultimately impacts the entire economy. Somewhat paradoxically, unions have much more of an interest in the long-term survival of the company than shareholders, who often take a short-term view of profitability. This ultimately leads to better decision-making.
A healthy severance package is good for employment stability. Preventing jobs from ever going away hurts everyone.
Belonging to the Fraud Department does not mean you're in charge of creating fraud. If they left "Prevention" out of the title that's because it's implied. Don't train your customers to fall for phishing attacks, geniuses.
I think maybe the smartest thing I've ever heard Michael Dell say was related to pulling the plug on a plan to outsource a tech support unit.
They realized the perverse incentive: if you get paid by the call or incident, and some calls are cheaper than others, you "benefit" if there are more easy calls. Even though it's better for the company if you recommend fixing the root cause of those calls (eg, changing the packaging, documentation, or design of the product so that people don't have to pick up the phone).
Outsourced Fraud seems like it would have some of the same moral hazards.
If you are complaining about their customer service, don't hold your breath when it comes to startup bank customer service. Chime, the largest funded neo bank in the US, had a 3 day outage in the fall when nothing worked (app, transactions, ATM) and could not handle the volume of calls or chat requests at all. People were literally stuck at the grocery store or gas station. That can't be the future of finance, either.
They're complete shit. Esp. if your transfer does reach the counterparty...
Does this say anything about their ability to provide a decent user experience, or good customer support though?
A few years ago, I had no choice but to use a bank like RBS for my business account. It was rife with unreasonable fees, a terrible website and a ridiculous sign-up process. They got my custom because there was no alternative.
Monzo, Starling and e.g. Tide are doing pretty well here as a result of the poor show that other banks have been putting on for years.
>If you are complaining about their customer service, don't hold your breath when it comes to startup bank customer service. Chime, the largest funded neo bank in the US, had a 3 day outage in the fall when nothing worked (app, transactions, ATM) and could not handle the volume of calls or chat requests at all. People were literally stuck at the grocery store or gas station. That can't be the future of finance, either.
Not all challenger banks are like this, though. I've found Monzo to be much, much more reliable that the various incumbents in the UK (who don't operate a status page, don't inform customers properly when things are broken and _still_ schedule multiple-hour maintenance windows every year when BST begins/ends).
Customer support can be variable, unfortunately, but I think this is a problem which has arisen mostly as the bank has grown. It's still better, for me at least, than a legacy bank.
The app is fast with an intuitive UI and does the job. If you don't believe me check out the app store rating.
My understanding is banks outside the US have not invested as heavily in their IT, and totally understand why challenger banks in other countries might have more success there. I've used in the HSBC app once, for example, and it's slow and terrible.
There's a value to in-person banking when you need it, though I think retail banking has become too prevalent in NYC. No complaints otherwise.
- The iOS app, website and other digital tools are significantly better. My local CU's app is some whitelabeled third party app that barely works
- With nationwide set of branches, I'm able to get individualized support for whatever I need in most cities in the USA
- Chase offers significantly more functionality in general - wiring money via their website, longer transaction history retention, etc etc
OTOH, my local CU's customer support is horrendous, most of their branches don't even deal with cash, and if you're outside of the metro they're based in, you're SOL.
I've experienced the same with Amex, Capital One, etc. They were slow to ramp up, but their digital properties and tools are excellent in 2020.
Having worked at JP Morgan, I think it's exclusively B2B or very wealthy individuals (for which the support is top notch). Chase, the US consumer bank is a separate entity.
We're going to see a serious decline in the number of challenger banks in the UK soon. Monzo has yet to post a profit. Yep, the bank we trust with our deposits is losing money every month, and Monzo is the poster child of the challenger banking movement. How healthy do you think the other banks are?
The strength of a retail bank is on the back of the strength of it's loan book. At historically low interest rates, that doesn't make for great profit opportunities for retail banks.
Meh. I don't trust the bank. I do trust the government deposit guarantee.
Do you mean "Monzo are making losses", because not making a profit is not at all a problem for ongoing operation.
That's a problem, but not a customer service problem. No company can handle that many calls, and those calls were all pointless.
I've mentioned a few times recently a particularly memorable job that went from pretty great to head on fire. The moment I decided to start looking for a new job, my stress levels went way down. Even though I didn't even look at job openings or my resume for another three weeks. I ended up staying more than 6 months, in better spirits than I'd been in a couple years.
I also discovered at some point that verbalizing that you have a Plan B makes it easier for coworkers to swallow your Plan A. They have a gut feeling that it won't work and it makes them feel better that contingencies are in place. And I have some suspicions that much of the ornateness we accumulate in code is hitting that same button in your brain. We can always swap this out later.
Are you sure those profits are in their retail banking sectors, or in their investment and corporate banking?
All = $8,5xx
CCB = $4,231 (50%)
CIB = $2,927 (34%)
CB = $ 938 (11%)
AWM = $ 785 ( 9%)
* Consumer and Community Banking, aka Chase retail banking.
* Corporate and Investment Bank, aka JP Morgan investment banking.
* Commercial Banking.
* Asset and Wealth Management.
(NOTE: The extra 4% above is accounted for in corporate overhead.)
Servicing customers is just an ancillary function of most American bank branches these days. If you go into one with a problem, in 90% of the branches, the person helping you can only pick up the phone and dial the same customer service number you would call on your own, and wait the same amount of time you would on hold. It's been a very long time since bank branches were allowed to handle anything but ordinary everyday functions.
The larger reason those branches exist is advertising and branding. You see the brand everywhere you go in an average day and subconsciously put together, "$bank is everywhere I go in an average day."
It's similar to how banks used to always be constructed to look like ancient Greek and Roman temples: To make you think of banks as solid, trustworthy, safe, and like they'll be around forever.
Now that we all know that banks merge, split, are born, and die like herpes germs on an infected lip, they scatter branches all over the place to play the same architectural influence game.
When I lived in Chicago ING used to have a bank/coffee shop on Rush Street with pretty good coffee. It was free for a long time, and you could use the wifi as long as you liked, you just had to be surrounded by ING/Orange ads.
On the other hand, I have an account at BB&T, and their in branch help is phenomenal. Most issues are resolved direct in bank without having to call outside support. Only time they have contacted outside support is when they don't know the answer to a question. On the other hand, if I call support they are quick to answer questions and provide detailed explanations.
I have other accounts at another local bank and the same holds true. In branch support is where it is at.
There is no question that as a bank grows in size and territory the level of support at the branch level and via phone support seems to degrade rapidly.
The Chase card got shut down due to someone stealing the number, so I was suddenly in a tight spot.
I went into the local Cupertino branch, and the manager was able to put in a rush order for a replacement card to be delivered directly to that branch for me in 48 hours, and then he called my cell to let me know when it arrived. All in all it worked out great.
On the flip side, I'd had TERRIBLE experiences with Chase when I was in college years earlier. Just the classic situation of having an account with $3 in it, getting a "minimum balance fee" that pushes me negative, and then a bunch of chained-together overdraft fees.
The USA has a _ridiculous_ amount of banking fraud compared to Europe, more than an order of magnitude higher for some types.
So, say what you want about government overreach but Europe has legislated lower fraud rates, better technology and even a banking API for interoperability. Not to mention fostering a lot of new fintech startups and challenger banks.
https://www.federalreserve.gov/publications/files/changes-in...
Tl;dr
For reference, according to the last ECB report in the EU the total value of fraudulent transactions from cards issued by SEPA countries was 0.041% of the total value of transactions (€1.8 billion - That's over 5x less fraud). Only 19% of that was point of sale fraud
$3.6 billion card fraud in the US is point of sale - 10x more than the €342 million point of sale EU fraud.
Overall there is $2.62 billion of counterfeit card fraud, $3.46 billion of "Fraudulent use of account number" (whatever that is), $810 million "lost or stolen card" fraud (not an issue with chip and pin), and $360 million "fraudulent application" fraud.
Not that things should never change - pieces of this puzzle should be replaced, but very carefully. A major technology exploit or bug at a major bank would be apocalyptically bad. The stakes are too high to rapidly entrust financial infrastructure to whichever fintech startup comes knocking. Consider the recent case of Robinhood, a big-leaguer as far as fintechs go, accidentally offering infinite leverage. This was enough to convince me not to want fintechs near the bones of the banking system for quite some time.
Anecdote: I had a massive issue with PayPal payments being held up due to a changing my business to a different state. It took literally 2 months of losing 80% of my online purchasing revenue (paypal vs. CC). I had a very difficult time getting in touch with a human, let alone a human with authority. I felt like I was never making progress.
So from my perspective, talking to a chatbot or sending emails to anonymous mailboxes is equally fraught as OP's experience and I could enumerate a similar list of gripes.
Bottom line: complex systems fail spectacularly when you encounter a new bug, regardless if it is some <10year old online startup or >100 year old banking system.
Source: Happened to me a few years ago as well
With Stripe, you are the customer and treating you right is it their best interest. Retail Banks try their hardest to charge you $50/mo for the privilege of maintaining a database row.
I would imagine for CitiGroup retail banking makes up a small percentage of their revenues. The engineers CitiGroup hires that would rival stripes aren't working on Retail Banking products - those products are probably fully outsourced.
Alternatively, better banks like Aspiration, which is a B Corp, but I wouldn't put all my money on that.
Reasons to use some credit unions. Just as there are good banks and bad banks there are good credit unions and bad credit unions.
When I wanted to buy my first house, I called the biggest local credit union to find out what the process would be like. Nobody would speak to me on the phone until I went to their web site and filled out a "pre-qualification" form that would then decide if I would be given a different phone number to call and speak to someone to set up an appointment to meet someone in person.
No thanks. I took my real money to a real bank.
Fidelity has free checks, debit withdrawals from any ATMs, easy ability to buy/sell stocks and index funds.
Their software could be better, but it's okay enough.
I'm not sure why anyone uses the other banks?
At least in the UK, the number of branches has halved in 30 years:
"Over the past three decades, the number of bank branches has fallen steadily. In 1986 there were 21,643 bank or building society branches in the UK. In 2014 there were 10,565. Over this period, the total number of bank and building society branches fell by 11,078 or 51%."
Did this not happen in the USA?
http://researchbriefings.files.parliament.uk/documents/CBP-8...
It looks like the US peaked in 2009 and has had a tiny (~5%) decline since then.
https://www.fdic.gov/bank/analytical/quarterly/2015-vol9-1/f...
For me, for the last 15 years, it's less than twice per year, possibly even less than once per year.
I used to have cheques to pay in from my grandparents (birthday etc), although I think I usually posted them to the bank. Postage was free. Presumably the in-branch bank tellers have better things to do than process cheques.
There were a few visits when I emigrated to close and open accounts. Much of this could be done by phone, but I had some old accounts from childhood which I'd never used online.
It's not at all surprising to me that the nearest bank to where my parents live in England is only open three days a week, with the ones that used to be nearer long since closed.
Ideal would be a combination of both worlds I guess.
Wonder if it got flagged as suspicious? Some banks aren't even legally allowed to tell you some things about your own account.
But it does seem banks are still brick and mortar. There's a bank that won't let you reset your pin online or over the phone, so have to psychically show up and show your ID to someone who presses something in their computer and tells you to type a pin into the USB key pad facing you on the other side of the desk. I guess it's just a small annoyance if you live near by, but the same bank doesn't have branches all over the place so if you end up moving across the country probably should get a new bank anyways. I guess tech wise could be done online as they could let you scan your ID and do a quick picture or video chat or something to make sure it's really you maybe. Plus some of the online only banks seem to pay higher interest too but not sure if people really care about interest as not sure if it really makes a big difference to some people. The local bank doesn't even pay 1% and hides the interest rate in the fine print somewhere while some of the online banks pay 1% and openly advertise such.
The US bank, on the other hand, is the single most dysfunctional organization I've ever dealt with. Every single person I've worked with borders on incompetent. There are so many useless layers of organizational abstraction that everyone is always on the phone trying to make sense of their own organization. And when things go wrong, Someone Has To Hang™, so when they're not trying to figure out whose job something is, they're trying to cover their own asses. Doesn't leave much time to get actual work done.
As near as I can tell, the only reason many of these big old banks are still around, is because reality hasn't caught up with them yet. And, of course, because they're sitting on a pile of money.
A bank that can't explain their own statement to me is no bank of mine.
If the Wells Fargo clusterfuck of several years ago is any indication, that "unknown" is very well known: upsell opportunities (or, in the case of WF, just surreptitiously adding services and hoping the customer doesn't read anything when they sign)
Some misconceptions though I'm seeing.
1) Banks always pay ACH debit requests (that draw money from your account).
No - you can sign up for ACH positive pay if you want.
This generally gives you till 11AM PST to accept or reject an ACH request. You can set rules by originator -ie, always pay up to $X from originator ID $Y.
You can also set a default to either pay unless rejected or reject unless approved.
You can also put an ACH block on accounts that shouldn't have ACH activity.
All this costs money.
2) Wire transfers
Hard to rewind these, so lots of extra hoop jumping. New accounts may limit your ability to wire large amounts of money.
3) Fraud is real.
Consider your parents and their retirement account. How would you feel if someone wired out or transferred out their entire brokerage balance? Think of how they authenticate with bank - could someone fake this? YES! Your parents re-use their passwords, write them on sticky notes, and their PII is everywhere.
Many more (sad) examples here.
In my opinion this is the main reason why things like cryptocurrencies have not taken off, and that is because their identity & fraud management truly sucks.
There's no person to talk to when you loose your access keys or forget a pin/password.
It's extremely hard to automate all that purely in software, and the very few that have succeeded in managing it(i.e. apple & google) have leveraged their hardware infrastructure plus partnerships with telecom providers and all their physical braches.
Yes old-school banks are inconvenient, can be hell to deal with, however it's very hard to scale fraud when you need to physically show up in person at a branch and I feel like this factor is very underappreciated.
They're also very stable (the regulated Canadian ones at least).
Recent progress includes much improved and cheaper SEPA payments thanks to EU legislation, and transparent "the customer owns his data" EU legislation pushing financial innovation.
1. What is your mother's maiden name that you gave us when you opened the account
2. What is the phone number listed on your account - so that we can verify that it is really you.
And when all else fails.
3. Banks ask you to go to a local branch with your id before they will unlock your account.
That is what happened with the author in this case. However he thinks that just because he is calling - the banks know that it is him when the bank can never be sure.
edit: this sentence is weird, on the US, the money is blocked on the American side according to the EU bank.
1) self-serve is a relatively new thing enabled by tech.
2) even in 2020 there are still clusters of people who aren’t great at using computers, smart-phones, and apps and prefer doing things in person or on the phone; yeah, you have some older people in there, but there are young people who still do things the old way, because they never had an interest in technology or just don’t know about other options.
3) Health-care and banking aren’t the only industries that don’t have slick self-service portals like Stripe. I’d argue the opposite; only companies built after the advent of recent web tech usually offer that, many of them, in fact, are tech companies.
Think about United Health, this company employs some 300,000 persons. CEOs at both United and Aetna are paid around $20M annual comp. Why does an insurance company need 300k employees? Google itself apparently has around 100k - and they do much more than just pushing paper. Why are these guys paid so much? To resist change perhaps, embrace too big to fail culture, and keep their 300,000 employees employed?
If private industry can seem this wasteful and inefficient, I don’t even want to know about the dark corners of government where people are paid to sit at desks and make photocopies on 30 year old Xerox machines everyday.
Yeah, just don't try to follow the winner having gamer remorse. Rumors are Mordor Security Agency gets serious searching for used keys...
I am somewhat surprised by the negativity on HN to this post. I think the author is on target with issues he identifies at incumbent banks.
The future is going to be customer centric, technology driven banks and the incumbents are going to have a very hard time adapting to that change.
And then the next contact answered my email with the subject "Issues / meeting tomorrow around 4pm?" with "Yes, I will assist you with all the issue, when is good time to meet tomorrow afternoon?"... things didn't improve from there (she prepared no paperwork for all the issues I detailed in my email and wasted an hour of my time) and only got slightly better when I escalated to the branch manager and got a different contact.
You can't explain this sort of attitude with being conservative etc. Nope, banks these days just suck.
Anecdotally, I opened up a consumer Citi checking account. The account has two distinct web UIs for transferring money via ACH. One looked modern but outright didn't work (as I recall, I couldn't get any of the dropdowns to populate with my account info so I couldn't use any of the web forms). The other was clearly ripped straight out of the late 90s/early 00s, but it did indeed work. The new version was the easily findable version, the older version could be hunted down with enough effort.
Additionally, it was actually impossible for me to find my routing number initially. I had to actually start a live chat with a customer service representative to get it.
Chase, schwab, capital one, discover and amex I've never any issues with like I did with citi. Even BoA was better.
I think my experience is a reflection of systemic issues at Citi, which is reflected in how they are doing fairly bad compared to the other big banks.
Banks have zero incentive to modernize. They have a lot of customers that are never going to move their money, and they don't need to constantly release new products or compete for customers. All they have to do is not piss off their existing customers so much that they move elsewhere. And because that's usually a non-trivial (and potentially costly) process, they don't have much to worry about.
Yeah, the user experience sucks, its an art to deal with though. So was Citi or Chase the brokerage firm, or was there a third brokerage firm like TD? Some people like the author's writing but some of the "who and what" is not clear, let alone the piss poor understanding of how the US banking system works.
However, I'd tone down the Stripe praise a bit. I bet that if you had a need that isn't covered by their script you'll be in even more trouble than with a traditional bank.
Simply put - bank has zero upside backdating transactions and an enormous downside.
There's the posting date, which is when the transaction appears on the statement. However, the details of the transaction, such as the amount or even whether the transaction should be cleared, have not been finalized, so they are still subject to change by the merchant. Paypal used to use this to authenticate bank accounts, and other merchants also use this to pre-authorize payment accounts (i.e., credit cards) or payments.
Then there's the clearing date, which occurs after the merchant finalizes the transaction. Legally, this is when the money actually leaves your account. Generally, the amount at clearing is the same as the amount at posting, however for restaurants, the amounts are usually different because the final amount includes the tip, if any.
It's useful to understand which one is being presented by default.
There should be NO ABILITY TO TRANSFER a medallion AND requiring proof that it is actively being used. You shouldn't be able to sell it.
Taxi medallions actually keep city streets clear of massive cabs, which is exactly the problem that happened in nyc once uber/lyft moved in.
I had an issue with a credit card company a few years ago, in which I had to request a new card. Apparently, as part of the new card issuance, they also "helpfully" moved my payment due date -- which I found out about when I received a past-due notification via the mail. Had I not had a paper statement with the correct due date on it, I probably could have been convinced that I had just missed making a payment, especially as the initial customer service representative insisted there was no way a new card could change my payment due date. Only after escalating a couple of times were they able to figure out that I in fact hadn't requested my monthly cycle only be 18 days long.
Now my wife makes fun of me because I still receive and file away paper statements, just in case.
Edit: removing names since it's not relevant to the story.