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Comment by InclinedPlane | Hacker News Reader

For decades heavy regulation of the banking industry has kept out competitors, cementing the advantages of the biggest banks. But it has also held them back from basic innovations that should be ubiquitous in the 21st century. Every bank should natively support the same features as PayPal, and more.

That situation is not tenable, eventually more and more banking will migrate to "non-bank" entities who aren't stuck in the mire of traditional banking and banking regulations.

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I'm in Canada, and all the major banks have online services. Several have iPhone apps. A recent service lets you email money to someone for a 50 cent fee.

Regulation has NOT stifled technical innovation in banking in Canada. It did, however, prevent the banks from getting in up to their necks in the CDO/CDS/real estate boondoggle. I think I like that.

The article laments that there are not thousands of banks like in the US. No thanks. How many of those banks went out of business in the last few years? No thanks. Having a small number of very well regulated, and actually fiscally conservative banks sounds to me like a fair trade for whatever it is having thousands of poorly regulated banks gets you that is so awesome its worth risking a major financial meltdown.

I'm a US citizen living in Canada. In my experience, your sentiment is common amongst Canadians.

The thinking usually goes "Our banks might not be convienient, but at least they won't fail like the ones in the US".

My understanding of the mortgage crisis, however, is that most of the problems were with large banks, not small ones.

I can tell you that small US banks an credit unions offer substantially better service at better terms than Canadian banks do.

In Ontario, for example, there's only 1 bank that offers $0 checking accounts without absurdly low transaction limits (like 1 transaction per month). That bank doesn't have branches, and offers almost no services.

It's absurd if you think about it. "You want me to pay you a fee for the privilege of loaning you money."

The only way that kind of business can be sustained is through negative externalities.

No fee bank accounts are standard practice in the US, precisely because there are many banks to choose from. Choice drives competition.

Regulation of big banks may have prevented a banking crash, but I think it's a mistake to extrapolate from that notion to "many small banks are bad", because that was not the problem in the us...

"Our banks might not be convienient"

I don't think that at all. I was responding to negative claims about technical innovations, and those are present in Canadian banks in one form or another.

The bank you are speaking of is probably PC? You can use any CIBC ATM for PC banking, and its banking reps are in Loblaws stores, so while it has no branches per se it's not as bad as you make it sound.

There are credit unions here as well. There are options, but I'll admit the big 5 have quite a lot of the attention. I have heard that many small banks in the US are lacking in several service features, I don't imagine it's a rosy awesome world in the US.

I don't pay monthly fees, and I pay maybe $5 in bank fees a year total.

I use PC too...They don't do so well with some things, like bank drafts, particularly in USD. You have go through a CIBC branch, both banks charge a free (even though PC is run by CIBC), and you have to deal with 2 bureaucracies.

I admit, compared to other Canadian banks, PC is not bad. In the US though, you don't have to choose between branches and no fees....

Also, it's worth keeping in mind that if you keep a balance (to avoid fees) you are still paying a fee. One part is loss due to inflation (any interest rate below inflation is a negative return), and the other is opportunity cost....

As an aside, both PCF and ING have de facto chequing accounts (what exactly makes a chequing account chequing anyway?) with no fees.

No fee bank accounts are gradually going away in the U.S. to significant chagrin.

Canadian banks all managed to lose billions on US subprime. Conservative they were not.

It is true that a handful of regulations kept Canadian banks out of truly severe trouble in spite of themselves - mortgage insurance, capital requirements, federal gov't guarantees through CMHC - but none of these regulations have anything whatsoever to do with the number of Canadian banks or the amount of competition in the Canadian banking industry.

When I moved to the United States I was astounded by the lower fees and better service here - and banks down here aren't particularly known for their low fees or good service. The Canadian public's "at least we're not America" nationalism is being used to rip you off.

Technically not all - Toronto-Dominion (TD) dumped all subprime in 2005 and weathered the storm considerably better than the rest of the big 5. Much kudos was given to Edmund Clark at the time for driving a fundamental change based on his view that "I don't think you should do something you don't understand, hoping there's somebody at the bottom of the organization who does."

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...

US bank losses due to subprime is about $1 TRillion, vs $2 Billion in Canada among the big 5. That's a factor of 500. That, and Canadian bank stocks bounced right back to their pre-crisis levels afterwards. I think Canadian banks managed to dodge the crisis quite well.

I don't pay monthly fees, and I pay maybe $5 in bank fees a year total.

http://thebankwatch.com/2007/11/17/canadian-banks-write-of-2...

>Every bank should natively support the same features as PayPal, and more.

We have different services, though. Interac Email transfers are fantastic: Just send an email to someone, they click a link in it, and money is deposited instantly in the account of their choice. It's brilliant.

I agree that competition is sorely lacking here, but it's not like we're being kept in a backwards tech ghetto.

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