Comment by bob1029 | Hacker News Reader

Comment by bob1029 | Hacker News Reader

> Anything that you can achieve with PDFs, presence, and persistence in a bank branch you can do with our API.

Not sure how to take this. With a small tweak like "you can eventually do" I would let it pass without criticism.

I work with bank cores, imaging, BSA and related middleware on a daily basis. The scope and complexity of these systems is incomprehensible to most. Many of our clients don't even try to think about how fucked up their business is. They prefer to hire Deloitte and other vendors like us to be stressed about it for them.

To give you an idea of how comprehensive a "full" banking API is, our combined WSDL and XSD references total ~9 megabytes. This is before codegen. The final reference sources as generated into the .NET codebase total nearly 20 megabytes. This is just the types & method signatures. The actual implementations live in an IBM system manufactured some time during the previous millennium.

But, none of that really matters. Whatever API method you call against a specific bank will have behavior that ultimately depends on a million things specific to them _and the region within which they operate_. So, its not enough to simply integrate with this massive API. You also have to understand a multi-dimensional matrix of regulations, end-customer behaviors, technological constraints, active geopolitical affairs, et. al.

Traditional banks have literally decades of legacy to deal with which drags them down. Many neobanks have shown that it's possible to provide a better and cheaper service when you start from scratch. A few examples of features neobanks i use provide that traditional banks don't have - virtual cards on the fly, for free; SEPA Instant for free; Open API; smart dynamic budgeting and expense sharing.

> legacy to deal with which drags them down

A non-zero amount of that legacy is due to regulations and compliance.

Most of what a bank does is totally invisible to the end customer. A "neobank" is almost always just a shiny consumer-oriented facade in front of a grumpy old bank. Someone still has to follow all of those laws.

What about Monzo or Starling in the UK? What is the grumpy old bank behind them?

Literally on index page:

This website is operated by Monzo Inc. Monzo reserves the right to restrict or revoke any and all offers at any time. The Monzo mobile banking app facilitates access to banking services through *Sutton Bank*, Member FDIC. The Monzo Mastercard Debit Card is issued by Sutton Bank, pursuant to a license from Mastercard International Incorporated. Monzo accounts are FDIC insured up to $250,000. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

That's for the US branch. Monzo in the UK is a real bank.

> Starling Bank

That one is an actual bank. In the UK, it's easier to open a real bank, than in the US. Bank of England has a special division dedicated to guiding "small" companies in becoming a real bank.

> A non-zero amount of that legacy is due to regulations and compliance.

Although there's a kernel of truth there, it's far from accurate. Most of the legacy is due to the assumption of regulations and compliance. The truth is that most of the systems are in fact out of compliance, but as long as you don't touch them the likelihood of a serious audit is small. The complexity is more about erecting an impenetrable wall to make the auditor assume it's probably compliant.

It's essentially about overwhelming auditors with details to fatigue them. Not to dissimilar to when lawyers flood each other with documents in tv shows.

Plaid founder's new startup column is building a bank from scratch for developers.

https://column.com/

This is still just a fancy rebranding of an old bank:

https://www.norcalbank.com/

Their FDIC charter was issued in 2006.

I think they actually bought the bank this time around to use the license. I may be wrong though.

I should have specified that I'm talking about EU-based neobanks, which are all real banks as far as I am aware (some are entities of bigger banking groups, some are standalone startups).

US banking being largely obsolete as a whole (checks? paid wire transfers that take days to arrive?) probably explains why there are no real neobanks in the US and they're all just a UI in front of a legacy bank. I doubt it has much to do with regulations, because I really doubt US banks are more heavily regulated than EU banks, who also have country differences to deal with if they operate in multiple countries (Revolut, N26), and they also have to check if the customers are American tax residents and handle that case too (or simply refuse them to become customers as some banks do).

Most of EU-based neobanks are NOT real banks. 90% of them are just a frontend.

Even Revolut that you cite was just a frontend until January 2021 where it became a bank, but just in the UK: https://en.wikipedia.org/wiki/Revolut#History

> In December 2018, Revolut secured a Challenger bank licence from the European Central Bank, facilitated by the Bank of Lithuania, authorising it to accept deposits and offer consumer credits, but not to provide investment services. At the same time, an Electronic Money Institution licence was also issued by the Bank of Lithuania.

What are you talking about? Revolut is a real bank, same as Monzo, N26, Aumax (part of a larger banking group so it hardly counts), Kard. Specifically regarding Revolut, they are a real bank in multiple countries now - UK, Lithuania, US and a bunch of other European countries.

Revolut does not have a bank license in the UK. They've applied, but it has not yet been granted.

Revolut is not a bank in the UK

Revolut has applied for a UK banking license (PRA and FCA authorisations), but they seem to be encountering difficulties and delays in having them granted.

Revolut's links to Russia are, perhaps, not helping with that.

Conventional banks provide all of the above (including open banking API) except instant virtual cards here in Scandinavia, so nothing to do with building from scratch. Just a matter of priorities and healthy competition.

The neobanks are all very incremental improvements, and is largely just packaging. E.g., Lunar being app-only obviously has a somewhat more modern app than the average bank.

I happen to work in a bank in Scandinavia, and you're both sort of right. We did at one point provide "open banking APIs" although we only ever approved one partner to use it, and have since shuttered it.

The truth of the matter is that banking is horribly entrenched. Actual business decisions are mostly driven by arbitrary considerations of which laws to follow that day. Although we provide a ton of functionality and business capability, we are still woefully behind on any sort of compliance measure, not because compliance is hard or impossible, but because nobody is actually critically examining the systems.

The problem for the "neobank" is not one of building technology to catch up. It's in cultivating an image where they are seen as systemically critical such that they will be afforded the same leniency in policing that the established sector already has.

Open banking is really something that needs to be mandated by regulators. That's what happened in the UK, and now you have a wide choice of financial apps that can access accounts at any bank that implements the standard UK Open Banking APIs: https://www.openbanking.org.uk

Open Banking is a great concept. Also Turkey has an own local version of it and improving.

It's in Turkish but translate will help you get the idea: https://ohvps.github.io/v1.0.2/contents/odeme-emri-baslatma-...

You're missing part of my point. Here in Denmark it supposedly already is a legal requirement. The point is that the legal obligation means nothing, because the banks are so entangled with the government that no actual policing is done.

Here's the api documentation of 25 Danish banks, including the one I'm a part of: https://apiportal.prod.bec.dk/openbanking/sandbox/product/17...

I worked with this in the UK - the regulation needs standards with regards to uptime, functionality, data quality and frequent audits to ensure banks are actually compliant. At the moment, besides the neobanks that somewhat know what they’re doing, everyone else’s Open Banking APIs have significant problems that make them unusable for anything serious.

Uptime and performance seems to be monitored pretty closely since 2020:

https://www.openbanking.org.uk/api-performance/

These figures only include the “top 9” UK banks that are required to implement open banking, not smaller banks like Monzo.

I’d argue that open banking is already being used for lots of serious stuff. Credit checking, for example. And of course pretty much any accounting/financial software supports open banking now days.

Ironically the smaller banks like Monzo are the only ones that actually do a decent job.

By serious stuff I meant stuff that requires perfect accuracy and integrity - credit checking wouldn't care if you're missing one transaction here or there, or if the timestamps are a little off.

But for accountancy, perfect accuracy is required and OB with legacy banks is far from perfect in that regard - the data quality is bad, you get missing/duplicate transactions, timestamps are off (due to TZ issues). Modern banks are the only ones where the data is any good. For accountancy services, this ends up causing significant support overhead to companies where customers complain their numbers are off and the company can't do anything because the bank sends incorrect data, not to mention engineering overhead where you have to try and clean up the data in-house (the problems are different for each bank, so you have to essentially reverse-engineer how each bank mangles the data and implement bank-specific workarounds).

> Uptime and performance seems to be monitored pretty closely since 2020

Uptime, sure. I too can make a 100% uptime API that returns random data.

When it comes to data quality, there didn't seem to be any authority (in terms of real, practical outcomes - not theoretical powers that never end up being used like the GDPR for example) to complain to - which I find to be a fatal mistake in a situation where banks otherwise have zero incentive to provide a functional & usable OB API (in fact, OB is detrimental to their business as it would allow customers to use a third-party's - often better - service over the bank's own one). Even the OB "gateways" like Plaid, TrueLayer, etc have their hands tied when it comes to this - once the issue is confirmed to be with the bank, the lead time on getting any kind of resolution is often months, during which you have a disgruntled customer breathing down your neck and blaming you for the problem.

Except "neobanks" legally not allowed to call themselves banks because they aren't banks. They are white-label service on top of someone who provides a banking API, and those usually sit on top of someone who provides them with some other API. There are like 3.5 real banks with "public" API that have bank chapter, if not less.

Like this Increase, "build your own bank", but themselves it isn't a bank. It's just an API to their partner banks.

LOL I had to change bank accounts because of a neobank that managed to get clumsy barely working IT taped together systems and pathetic app worse than any "traditional" bank. They achieved in 2 years the same crap it took the incumbent 2 centuries to do.

I learned (almost) the hard way how important legacy features are.

For me it was buying a house and realizing that you must be able to wire money.

When the stakes were high, Varo failed me (they promised they could do it, but on the day I needed it they refused) and I had to scramble at my traditional bank to make the payment in time to avoid $20k on penalties.

Other than the most important transaction of my life, though, they've been great!

>Other than the most important transaction of my life, though, they've been great!

I don't know Varo but would you imagine continuing using them for other transactions and using the traditional bank for traditional purchases (house, etc.) After all, people don't go through the most important transaction of their life frequently.

Bank of America has had virtual cards for a long time now.

A better, cheaper and much more limited service. For many people and businesses, most of the time this is indeed enough but this legacy is being used and needed.

As others have mentioned legacy banks here in Scandinavia are slowly catching up, the main reason being the slow trickle of custeos to neobanks.

Obviously the word "anything that you can achieve ..." in your quote is an exaggeration. It is quite obvious that fintech wants to simplify the banking process to basic daily procedures most of the people need (like money transfer and accounting), and ignore the rest. It won't be the first FinTech doing so and it won't be the last. But it is one where "we want to have a high quality API" is the unique selling point.

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