Using a bank's services shouldn't require knowing how banking infrastructure works.
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.
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.
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.
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?