Small Bank in Kansas Is a Financial Testing Ground

> > But hastening the movement of money creates risk for banks, because it generally means less time to catch fraudulent transactions.

> That's got to be a risk in Europe, too, no? How is it dealt with differently?

This is probably the case of someone trying hard to come up with at least some downsides. Most transactions are relatively mundane, and for an automated transaction between two bank databases, there is, I think, very little that can be done in a day that cannot be done instantly. The part that screens fraudulent transactions is very likely already automated, I can't believe it wouldn't be. It's probably not even the most common/dangerous type of fraud.

European banks have collective agreements about money transfers with each other. I imagine it might be harder to implement these schemes if you are the only bank trying and need to cooperate with other banks. Uncompetitive markets can be strange sometimes.

I think most of the difference is in the legal frameworks and contracts. Most US electronic payments (ACH) can be disputed for quite some time after the initial transfer.

> But hastening the movement of money creates risk for banks, because it generally means less time to catch fraudulent transactions.

Less time to make money on the "float"?

> How is it dealt with differently?

I can't speak for Europe. I once griped about the slowness of US banking to an Australian acquaintance who worked in banking technology in Australia and Britain. Here follows my half-remembered, probably inaccurate understanding.

In Australia, a bank has a very high confidence of that a transfer is going from real, physical person A to real, physical person B.

This is because of the "100 Point" identity check you need to perform when you open account. To open a bank account, you need to present multiple, independent forms of ID, including at least a driver's licence or a passport and some identification showing your current residential address.

It can absolutely be circumvented, but the bar for doing so is significantly higher than casual small-time fraudsters are interested in.

In the USA, I can find a small-town bank who will open my account without looking at me too closely, then start issuing dodgy cheques much more easily. In Australia, no matter where I go, I will be required to prove that I am who I say I am. So the ability for banks or police to lay hands on me or my money is significantly strengthened, and consequently the rate of fraud is lower.

I see this also with online shopping. In Australia I never once, in my entire life, had a credit card purchase rejected. In the USA my Bank of America card regularly locks up and waits until I login to assure them that it hasn't been stolen.

Exactly. It often takes only minutes or even seconds from the time that a client pays to the time that the money is visible in my bank account. That's even the case for a transaction from another european country. Online shopping goes like this: you order a product on a company's website, you select your bank, this redirects you to your bank's website where you authenticate the transaction and click OK. No credit cards involved.

From what I've in the finance industry, there aren't enough standards.

It seems like every bank/broker/data provider stores and sends data in its own format and has different procedures for clearing. It's like the priority is to make sure people can't switch easily.

Interestingly, Django also came out of Kansas :)

To be fair, Kansas does have a GDP almost on par with New Zealand, with just 2.8 million people. Their output per capita is comparable to Denmark. It might not get much press attention, but that's a serious amount of economic activity.

At least until the political powerful banks get bothered enough to throw a wrench in their works, at which point those people which condemn Uber's innovations because they violate regulations will need to also condemn this bank's innovations to remain consistent.

Going from zero to $40 billion in a few years isn't real impact? Those silly investors. If only they'd give all those Nice Guy Inc. a chance..

Well, if you're in SF you could show her the 7 bedroom mansion you could buy in Kansas for the price of a one bedroom in the mission.

Maybe you could sweeten the deal by getting her a cute little dog named Toto?