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Comment by _broody | Hacker News Reader

For sure, defeating banks in the matter of customer interaction seems like low-hanging fruit. As the article says, they are too slow, too cumbersome, and I'll add that they are too unfun, and their sales departments are pushy and intrusive.

Do we even need monolithic financial entities in this day and age? Most transactions would be better handled by smaller, specialized and modern service companies. Banks are to financial startups what taxi driver unions are to Uber.

And the financial sector definitely deserves a shakedown, after they essentially plunged the rest of the world into a decade of misery with their securities fraud during the housing crisis, and went unpunished for it.

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>Do we even need monolithic financial entities in this day and age? Most transactions would be better handled by smaller, specialized and modern service companies. Banks are to financial startups what taxi driver unions are to Uber.

You forgot one of the most critical functions of banks like this-- large scale institutional lending.

A business needs to borrow $2 billion dollars -- are you going to crowd fund that?

A state government wants to borrow $800 million in bonds for a new arena, can you GoFund that?

A major government wants to store $30 billion of their own currency in a financial product that will decrease in value against the dollar more slowly than their currency. Is there an app that helps governments store 30 billion in assets (or are we naive enough to suggest that bitcoin is a smart investment?)

A major pension plan serving 100,000 retirees needs their 100 billion dollars in assets to be managed responsibly, can a 24 year old Stanford grad manage that?

I think calling Banks the "taxi union against Uber" is painfully naive in the sense that it only looks at small transactions and consumer transaction while ignoring the very large institutional business-to-business and business-to-governments side of banking.

Maybe small business will get their lending needs with new technology but I just don't see a Fortune 50 company taking a multi-billion dollar loan through crowdsourcing.

Having worked for a major bank for several years, the way huge deals like this get placed isn't too far removed from crowdfunding, it's just that the dollar amounts are higher and the participants are big institutions instead of individuals.

I was on the deal team for a $1.4bn capital raise and probably 20 or so $100mm-$500mm raises, and the way it happens (for bond and equity issues anyway) is there's a brief marketing period and then a bunch of sales guys get on the phone, call all their institutional accounts, get commitments from them, and the deal is done. It's amazing how quickly it happens. And the fees we earn on these deals are ludicrous. I think there's no way the banks don't get disintermediated.

> A major pension plan serving 100,000 retirees needs their 100 billion dollars in assets to be managed responsibly, can a 24 year old Stanford grad manage that?

Judging by the NYC pension fund, I could manage 100 billion better.

http://mobile.nytimes.com/2015/04/09/nyregion/wall-street-fe...

Wow, no kidding! For the huge discount over their current guys at a mere $1,000,000 a year, I'd happily put the pensions into some Vanguard index funds... :D

The NY article is misleading: http://www.bloombergview.com/articles/2015-04-09/new-york-di...

Then again, just burying the money in your backyard wouldnt be too far off...

Are you saying that too big to succeed will solve too big to fail?

"A state government wants to borrow $800 million in bonds for a new arena" ... Arenas are a curse on the population. ( http://www.theatlantic.com/business/archive/2012/09/if-you-b... )

"A major pension plan serving 100,000 retirees needs their 100 billion dollars in assets to be managed responsibly, can a 24 year old Stanford grad manage that?"

If the tech start ups change the game, do you think the pensioners are going to trust their money with a kid? no... Do you think the Wall Street talent is going to disappear just because the reviled industry they worked in changed? I don't think so.

I for one welcome the change. The industry is a bit of a mess right now.

Is it a terrible thing that massive amounts of money can't be promised and taxed? If that kind of lending is in fact good business(I'm not convinced it is) Couldn't the same loan be made through multiple smaller share holders? I don't think billion dollar loans are a requirement for society to function, or the best option.

It could but that's the wrong perspective. In "free" system that respects private choice, what can and cannot be achieved isn't as important as what deciders decide on.

A large bank will perform risk analyses and consult with their data and math people, consult their legal people, consult their insurance people, and will choose what they think is best.

So your option can be totally feasible and never chosen by a large bank- a similar fate to many new technically feasible ideas.

But then again, if you were a large entity, would you prefer to be indebted to one large entity, or a thousand small ones? All things equal, I'd rather owe 1 person 1000$ than 1000 people 1$, and I imagine their lawyers and insurance people agree.

I understand why you would only want to owe 1 person $1000, but I think you see more ideas funded as the number of funding providers increases. My dislike of large banks is totally a bias here, but I'd like to think more funding options = superior to a single decision maker.

It's also true that for very very large loans banks already work together to spread the risk.

Yeah it is a huge problem: Without a way to source a billion dollars Intel can't build a new factory.

Now you could replace banks with e.g bonds sold in the public market, but you still need something to finance the IT of the world.

If Intel is sourcing a billion dollar factory, shouldn't their revenue be multiple times that? If you're telling me the factory they need costs $1 billion, my response is that the cost is only that high in a market full of banks that make billion dollar loans...

Intel's factories cost billions of dollars (actual cost is around $5 billion now, not a mere $1 billion) because they're unbelievably advanced. This isn't the housing bubble applied to factories. They're building a facility that uses the most advanced technology in the world on an industrial scale.

Their revenue is many times that, certainly, but that doesn't mean they just have billions of dollars lying about doing nothing, waiting for the company to need a factory.

Sometimes it's not so simple. I recall Google issuing bonds because it was cheaper than repatriating non-US revenue from abroad to fund US investments (it would have been taxed twice, albeit at an extremely low rate on it's non-US revenue).

Lets say that that billion dollar factory will earn itself back over 10 years. Do you have 10 years of mortages saved up?

Also I am going to have to ask for a source for your hypothetical reply.

> Is it a terrible thing that massive amounts of money can't be promised and taxed? If that kind of lending is in fact good business(I'm not convinced it is) Couldn't the same loan be made through multiple smaller share holders?

Sure, in fact, the same loan probably will be with the existing system. Large (hundreds of millions of USD) bond offerings to the public, from either a state agencies or private firms don't end up with only one purchaser in many cases, even if they have a big financial firm facilitating the offering.

The question is how do alternative mechanisms do this as well or better?

  A major government wants to store $30 billion of their
  own currency in a financial product that will decrease 
  in value against the dollar more slowly than their 
  currency. Is there an app that helps governments store 
  30 billion in assets (or are we naive enough to suggest 
  that bitcoin is a smart investment?)

Could someone, well versed with central banking methods or fiscal/monetary policy, explain how this works?

I'm not very monetarily/financially literate.

Why would a country invest in some product that decreases in value in the first place - even if their own country's currency is slowly but surely losing value?

By "decrease in value", does the author mean temporarily or in a slow downward trending gradual spiral ?

Why not pump the same money into something that is likely to grow in value, like rare earth minerals or into companies that hold rare expertise in battery technology or something similar?

edit: clarification

because of risk, is in everybody interest of playing as safe as possible with the government assets (unless you channel them to your Swiss account using your cousin's fake company as a front

Why does the institution that does this sort of lending have to be the same one that holds my checking account?

You bet that you can crowd fund Capital markets. It's just done with much bigger checks. One of the very large food and ag banks told us (AgFunder) that they were losing clients to JPM and GS because they didn't have their distribution power, and that if we could provide them with a distribution platform they would literally bring us billions of dollars of deal flow. On the other side of the table we have sovereign wealth funds and PE funds that are asking us when we can bring on larger deals. One conversation today said that they were looming for $500m deals to invest in.

The theoretical basis for banks is twofold:

1 - Connecting money providers and money users. This can play out in the big deals that you mention. They provide $2 billion in financing, and line up a bunch of investors on the other side. Additionally they fulfill this in trading securities.

2 - Taking short term money (deposits which can be withdrawn at any time) and funding long term debt (mortgages, long term bank loans). This can only be done by aggregating lots of suppliers of funds, and pooling them together.

I suspect that much of this can be crowd-sourced and disaggregated, starting at the bottom.

Exactly. If these small players start by acquiring deposits and investment accounts, they will be offsetting those deposits from the big banks. Once the small entrants reach a certain size they will themselves be able to play in the larger financing space thus competing with the big banks in more areas.

Hedge funds have been doing this for years, and some of the largest hedge funds now participate in many of the lines of business that are traditionally thought of as investment banking.

Both those problems can be solved by emiting bills that anybody can buy and sell on a secondary market.

The problems that can not be solved by that are basically how to discover who one should trust enough to lend money, and agregating people to persue unpaid loans.

The problem of course being that banks have a heavily regulated oligopoly on the _creation_ of money. Banks have a right to lend (a lot) more than they have deposits and capital. Think fractional reserve banking. They effectively create money out of thin air. Kickstarter and friends can't do that.

But the tech sector may come start scratch at the edges. I hope so, together with you!

Fractional reserve banking doesn't mean you lend more than you have. It merely means you keep less money on hand than the sum total of your deposits and capital. This "creates money" because the depositors still act like their deposits are 100% present, and the debtors have some of that same money to spend. Banks aren't lending more money than the deposits and capital they hold.

Kickstarter and friends can't, but there are other tech options for creating money, or money-like instruments. Bitcoin and Zynga points are some first steps in that direction. IOUs could be another. Any firm that can give credit is also a move towards money.

But these are very different business cases - retail banking and institutional investing have very different customers, practices, regulations, etc. So why not make these be different companies?

>But these are very different business cases - retail banking and institutional investing have very different customers, practices, regulations, etc. So why not make these be different companies?

Operating Systems and Search Engines are completely different business cases with different industries and markets.

So why does Google do Search and Android? Because both fit the larger Google Data focus.

Both retail and institutional banking fit the larger Bank Finance focus.

They are one big company for the same reason why Apple makes smartphones and desktop operating systems.

For the same reason why Microsoft develops the best Office Software as well makes tablet computers with styluses.

What can I say? You can use government to force large companies to break up, but otherwise the existence of a large company that works in multiple industries or has multiple focuses isn't that crazy or alien.

A business needs to borrow $2 billion dollars -- are you going to crowd fund that? A state government wants to borrow $800 million in bonds for a new arena, can you GoFund that?

Sure, why not?

> A state government wants to borrow $800 million in bonds for a new arena, can you GoFund that?

say you have an arena that holds 50,000 people, sell the right to name a seat for $100, and the right to choose an image to put on the seat for $1,000. That's 5,000,0000 in naming rights on the seats, and 50 million for the images on the seats.

Charge more for putting an image on contiguous seats - if you want n seats in a row, that's $1000 *n^2. They always end up selling naming rights to these things anyways, why not just have images in the seats be ads or pictures of loved ones or whatever?

Sell colored tiles in the bathrooms and even things like the color of a single screw for $10. sell the names of the concession stands and the names of urinals on the bathroom and the pictures on the bathroom stalls.

But who needs a fancy, multicolored stadium named after and showing the character, images and pictures of the people and brands from the city when you could have a big bland boxy thing named after a large company, and then 30 years of bonds to pay it off, right?

I mean, realistically you don't have to charge fans a cent. Kraft bought the Patriots a stadium in Foxborough at his personal expense: zero cost to taxpayers or subsidization from fans outside of the business he operates.

My point wasn't to find an alternative to taxpayer stadium financing as those alternatives exist today, my point was to say: If a government wants to take out a $800M loan, how do we make that happen. If an entity has a need: how do we meet that need. Merely saying "your need is invalid" is not a solution in any sense.

By trying to invalidate my use-case of an $800M loan, you side-step the actual problem: Providing a 20 year $800M loan. That's a real need in today's world. Providing a billion USD that you don't get back for multiple decades. That's a real world need that will have to be met by your future-tech. Not evaded, not made irrelevant, not ignored: but solved. How do you crowdsource finance in a way that you can take someone's money for 20 years? Because we know how traditional banks can achieve giving away billions for decades, but not how an crowdsourced futuretech solution would approach it.

Doesn't a liquid securities market imply that a lender in a 20 year loan can always sell their loan to others if they want? So there's no need to require them to provide a 20 year lockup, assuming a secondary market exists.

If the government (by US theory, this is: "the people") wants to take out a $800M loan, then, by definition, it will have no problem 'crowd-funding' it.

>If the government (by US theory, this is: "the people")

You're talking about the Federal Government, which yes can monetize debt through the Treasury and Federal Reserve by act of Congress.

However, I'm talking about State and Local governments which are unable to run deficits and unable to create treasuries to sell to the Reserve for new cash.

For all American governments EXCEPT for the Federal level, they must, like any large corporation or entity, find a lender and pay interest.

The bigger question is what happens if you don't sell at that price.

Large bond placements usually begin with testing clients' enthusiasm at specific interest rate, and then adjusting the interest rate in case of under/over-subscription.

Not saying you couldn't do that via an online auction system, it's just that cost and time it takes is usually under-estimated.

Wow, this sounds to me like a case for the innovator's dilemma.

Although it also would disrupt several startups, I have been saying for a long while now that the payment processors like Visa, MC, etc., really shouldn't exist. The government should have its own digital currency and its own payment processing network.

If the government doesn't get on that, it is under serious risk of losing it's primary purpose of governance, to which currency and financial systems belong.

There is talk about the end of the dollar as a physical currency sometimes, but government types should really start realizing that simply handing over currency and payment processing to private entities represents probably the biggest threat to the westphalian nation state that ever existed.

One of the primary powers that cause people to congregate around a nation state government is the control of currency. It may even represent another major crack that could result in the fracturing of the USA.

I disagree that private ownership of payment processors means the government is losing control of it's currency. I see Visa, MC, and banks in general as an abstraction of the dollar rather than a replacement for it. When I use a card or bank wire to transfer money I'm still technically sending dollars from one entity to another.

Since the gold standard has already proven to be too unstable, and cryptocurrencies haven't proven to be stable enough yet, I believe the only competition for the dollar is other nations' currencies. And determining which nation's currency will be the world standard is typically based on who has the strongest military and economy.

payment processors like Visa, MC, etc., really shouldn't exist

Agreed. When it's cheaper for a large company to do checks (physical or ACH) then we can pretty much assume that putting electronic money in the hands of for-profit entities like Visa and MasterCard is a real mistake. The cost of a credit card transaction is too damn high.

I will grant that a (US) government agency is cumbersome and inefficient and risible, but putting that amount of control in private entities is a mistake on many levels.

Payment processors are a cartel. I'm not from the US, and no other processors have really come up. It's basically an underlying tax on all products -- as much as I don't agree with the rest of parents post -- it really is absurd such simple tech isn't done by the government. It would be like delegating private presses for the dollar and in turn giving them a huge fee for bank deposits.

Not only checks, but the hallmark of irony in this is we still use paper money. It should be a lot cheaper and simpler to move bits!

It all goes to funding those cartels, and most of their spending is not to improve service but maintain the absurdity.

> It would be like delegating private presses for the dollar and in turn giving them a huge fee for bank deposits.

As a mildly amusing aside: the Hong Kong dollar is printed privately, and issued by three private banks.

Haha that's nice trivia. Of the sort you hold onto for just the right moment :)

My previous employer was amongst the three. So I specifically got one bill printed in their name, Standard Chartered.

Is your comment intentionally dripping in irony? The government ceded their control over the financial system long ago. Ask yourself, how many senators and congressman handle strictly financial matters? Ask yourself, who primarily earns interest on all the loans people take out? Ask yourself, why was the federal income tax prohibited in the original constitution?

The government already has its own fiat currency that can also be handled digitally. I don't see any risk of the fiscal and monetary policy slipping out of their hands soon.

How does this work when you travel abroad? It seems like various currency-issuing governments are small-to-medium players in this arena with large transnational companies being the only ones to capture the economies of scale.

Bitcoin is going to break the backs of governments anyway - they can create their own digital currencies, but there's no guarantee that people will use them!

Sure there is -- they can make alternatives illegal. Then big companies must accept the government sponsored digital currency, which would make it the only currency viable for mass market (alternatively, no digital currency will be widely adopted).

Do you think people would really accept the banning of certain pieces of code as legitimate?

The US government already lost the battle on "export grade" encryption, and I believe they'd lose any attempts to ban other code as well.

Boo! Party pooper!

Silly thing to say. There's no guarantee that people will use Bitcoin - and indeed, most people don't.

and I'll add that they are too unfun

Maybe I'm alone, but I don't have a huge problem with my bank being "unfun".

Boring and efficient is fine. Boring and inefficient is a grievous sin that makes people hate you forever. See also the DMV/RMV.

I don't know if this is unique to NYC or something, but the last time I had to go to the DMV, I scheduled my appointment online ahead of time, walked in 5 minutes before the scheduled appointment, renewed my license, and walked out in about 20 minutes total.

Their site was a little ugly, the clerk who assisted me was a touch curt, but overall the worst part of it was my apprehension about going to the DMV.

I know my situation was simple, but I thought that was the big objection to the DMV: simple things are hard. The whole thing was pretty easy.

Whew...glad it went well for you, but:

A week ago I moved and had to register my car in California. I spent, all told, twelve hours waiting in line. I could have gotten an appointment, to be sure...in two weeks.

Huh? You have six months to register your car in CA. Why not wait two weeks?

Also, some AAA offices may be able to register your car with the DMV.

Hmm...I was under the impression it was ten days. Perhaps I worried needlessly.

I've had a similar experience in NYC. Total time for a license was only 10 minutes—and I'd been dreading the hours I'd have to spend there.

Passports, on the other hand...

For something like a DMV, it is important that a live human being personally verify individuals and documents in-person. This is inefficient by design, but quite necessary.

Automation of things such as this with current technology makes something as important as vehicle licensing and government-issued identification (along with everything that entails) a very risky and dangerous thing indeed.

Okay, so going to the DMV is boring and even infuriating. But, for now, we must have human beings asking all of the questions, administering all of the tests, looking at every person in the face, double and triple-checking things and so on.

Yet in other countries similar processes are no where near as painful, so the claim that "having human beings involved necessarily makes things painfully in efficient" is not very plausible.

For reasons I don't understand American government systems tend to be very difficult and painful to deal with. This not unique to the US, but in the developed world most other nations have seen improvements since the '70's. The US, not so much.

Getting a driver's license or health card in Canada used to be pretty painful. Today it's very streamlined. You still have to deal with people face-to-face, but the process has been designed to be quick and efficient.

In my experience the Canada DMV has incredibly hot young women working at the DMV. Back home, it's Patty and Selma.

I'm in the UK, and "going to the DMV" is one of those US rituals I don't understand. We have one licensing office and interact with it entirely by post or Internet. Photo authentication can be done off the passport photo system.

Passport photo authentication is effectively crowdsourced, with a very British requirement that the person authenticating the photo be suitably middle class: https://www.gov.uk/countersigning-passport-applications

The california dmv now has touch screen testing in at least some of its offices - no manual administering of tests required. https://www.dmv.ca.gov/portal/dmv/detail/pubs/newsrel/newsre...

I want my bank to give me quirky little compliments like "you look nice today" like Slack every time I walk in.

Wells Fargo ATMs will wish you a happy birthday and congratulate you on X years with Wells Fargo. It's a little creepy, but if you like fun...

1/2 of ATM fees should buy you a lottery ticket every time you get hit for $2... it'd placate the masses!

WaMu. Maybe they weren't perfect, but one of the things we lost when Chase ate WaMu was their "quirkyness." They always seemed happy and friendly in my branch. Now? Zombies.

No need for quotation marks, quirkiness is a real word.

Sometimes slow is forgivable if things are fun. For example, I enjoy walking to the farmers' market, though it would be faster to order food for delivery. But I don't enjoy driving, parking, and picking packaged goods from a warehouse (Target), so I prefer to have my paper towels delivered.

You're not alone, I want my bank to be boring and I want almost no interaction with them. There's a bank in the United Kingdom called Metrobank which promised to be different to existing high-street banks, they managed to get me through the door out of interest but as soon as I saw one of the members of staff dressed as Henry VIII I made a hasty exit out of the other door. They also seem more interested in dogs than their customers[0].

https://www.metrobankonline.co.uk/Discover-Metro-Bank/DogsRu...

I haven't actually entered a bank in years thanks in large part to software development. I think it's kind of 'fun' to take picture of a check and deposit it.

I'm happy that I only ever had to deal with cheques once in my life.

Yeah, tell me about it. I've never seen a ping pong table or a razor scooter at my bank. It's definitely ripe for disruption.

Making managing your funds 'fun' as in interesting, and addictive is a huge win in a place where most people are so financially illiterate they are afraid of their own money-management.

Uber used a classic wall st. move to get where they are: regulatory arbitrage. The law said that you can't pick up passengers that wave you down in the street unless you buy a yellow taxi medallion for $1.5m. But uber said that pressing a button on your phone while standing in the street is not the same as waving your hand at the car so now it's ok.

I've been thinking that if someone can do a similar thing for banking using bitcoin that they can avoid some of the rules and operate for a lot less cost than the existing regulated entities. Unfortunately I have no idea what this would look like.

I don't know about you but this makes me incredibly nervous; I have mentioned before there probably is some inefficiency in taxi medallions, but uber is also doing things like ignoring government regulations wholesale (see Germany), potentially breaking labor laws, and may exist to the detriment of the public as a whole. If you recall 2007/2008 the banks got in big trouble because they were doing legally questionable things (sub-prime lending, etc). If the means by which tech start ups get ahead of Wall Street is by subverting the spirit of the law even more so than Wall Street does currently, the precedent and consequences that would come of this would be rather awful and most unnerving.

Lots of those legally questionable things were driven by regulation. Repackaging subprime mortgages as AAA security was driven by the requirements of some institutional investors to only deal in AAA rated securities.

Instead of giving banks secrecy and deposit insurance, we should do the opposite: require open books (perhaps with a six month lag), and no deposit insurance. That would keep customers monitoring their banks much more carefully for any fanciful shenanigans, and give a premium to the most boring banks imaginable. Boring is sometimes good.

I agree mostly, I think more regulation is important, and transparency is critical and much needed. I would not choose, however, to bank with anyone who wasn't FDIC insured; while the FDIC may allow some banks to be less risk-averse than they should be, consider a metaphor to your suggestion: when was the last time you audited all the security critical code on your computer? When was the last time an average person audited the security code on their computer? To truly expect everyone to watch out for themselves is asking a lot, without deposit insurance, sets up you up for the kind of problems seen in the 1920s that brought about the FDIC in first (even "good" banks can suffer a catastrophic run during events like what occured in 1929). If you're ever seen the amazing games corporations can play with their accounting, and begin to realize the magnitude of the task before a group like the SEC, to expect an average consumer to trust his/her checking account to their own ability to watch out for themselves seems rather foolish.

I'd expect other people to do the audits, short the banks that fall short, and then publish their reports.

I think back in 1929 we didn't have the transparency requirements that I was suggesting. (And if you really want a bank that survives any run, you will have to pick one that offers no-fractional banking, and suffer high costs on average. Might be worth it for some.)

> Banks are to financial startups what taxi driver unions are to Uber.

Not quite - taxi driver unions are less competitive (in part at least) because they choose not to disregard regulations.

Also because they have less money - by many, many orders of magnitude.

They should have disrupted more! Meritocracy, motherfuckers.

* taps the dial of his sarcasmometer, puzzled *

If by "disrupting" and "meritocracy" you mean "break the law" and "kleptocracy"...

HN downvoter herd mentality types can't handle the individuality and personal responsibility of libertarian utopias that Uber and its ilk will usher in, so they fight back with the only tools at their disposal. Stupid laws are meant to be broken, and 'kleptocracy' is a shibboleth, identifying you as a poor (or, worse, a poor-sympathizer).

The laws put in place are not stupid -- they are put in place to protect both riders and drivers against well-known market failures such as information asymmetry and market-for-lemons [1,2]. They may be outdated and in need of revision, but I think it's premature to conclude that Uber has all the right answers.

[1] http://en.wikipedia.org/wiki/The_Market_for_Lemons [2] http://time.com/3592035/uber-taxi-history/

While I agree that many of the laws aren't stupid and should be followed, I can't figure out any justification, other than greed, for restricting supply the way many cities do. If you can, please share.

I was being sarcastic, and if that's not fairly apparent I should probably change my approach; there's a tendency for HN to go full meritechnocrat in these situations and side with whoever seems the most disruptive. I find it obnoxious for exactly the reasons you've posted here, among others.

Just try less sarcasm next time. I know it feels good, but it seldom furthers any debate.

> I was being sarcastic, and if that's not fairly apparent

Erm... your audience here is mostly literal-minded computer techies.

And because they choose to disregard user experience.

While I'd say we have too few banks...

> Do we even need monolithic financial entities in this day and age? Most transactions would be better handled by smaller, specialized and modern service companies.

Try dealing with all the special snowflake APIs of twenty or a hundred suppliers of physical goods which are essentially a list of transactions. Then on the other end you mesh with Amex, a merchant gateway for Visa/Mastercard, Paypal, Amazon, etc.

Even "standards" tend to get "adjusted". EDI becomes Vendor X's bastardization of EDI that only resembles EDI at a glance from a non-technical person.

The more "special snowflake" providers you have, the more complex the system becomes and complexity breeds all sorts of inefficiencies. I'd much rather have 50 'monolithic' banks that all abstract things and talk to each other so I only have to deal with "my" bank than 10,000 "financial entities".

> what taxi driver unions are to Uber

I don't want Uber "oh, we'll break regulations and standards because we can get away with it and the contractor is the one that is legally liable" anywhere near any kind of banking system. That attitude would cause all sorts of truly massive problems.

> EDI becomes Vendor X's bastardization of EDI that only resembles EDI at a glance from a non-technical person.

Having spent much of the last decade dealing with systems dealing with EDI in healthcare, I have to say I suspect that largely happens with X-12 EDI standards (at least, the HIPAA mandated ones in healthcare, its possible others are different) because they only resemble suitable technical standards for the intended business domain at a glance from a person unfamiliar with either technology, the business domain, or, ideally, both. (And, on top of that, they are interdependent, each standard is non-free, the standard packaging of all the mandated standards doesn't include the basic standards underlying all of them that they rely on, and even with all the X-12 standards each of them relies on, by reference, dozens of other non-free, third-party standards, for many of which the X-12 standard provides only a postal address for the third-party source.)

Fair enough, but I was mainly using it as an example of a "standard" being not-a-standard-because-too-many-different-implementations and why a monolithic entity would be less prone to this problem.

> and I'll add that they are too unfun, and their sales departments are pushy and intrusive.

I think you missed something big: They are too rich. As the saying goes, "Where are the customers' yachts?"

Just as the rise of etrade, datek, ameritrade killed off the overpriced stock broker biz, there are whole swaths of banking waiting to be dragged into the internet age.

> Do we even need monolithic financial entities in this day and age? Most transactions would be better handled by smaller, specialized and modern service companies. Banks are to financial startups what taxi driver unions are to Uber.

On the individual consumer-banking side, there is a strong case to be made that this is true.

However, as long as Fortune 100 companies and large pension funds exist, they're going to do massive transactions in the capital markets -- and you need similarly huge financial institutions to bookrun on these kinds of deals.

So in my view, it's likely that startups that can provide a more agile / fun / efficient / whatever experience stand poised to eat banks' lunch in some areas...but there is definitely a significant slice of the market that requires market-makers to be massively capitalized.

> Do we even need monolithic financial entities in this day and age?

Four letters: F.D.I.C.

What do you want to say? That FDIC forces institutions to be large? Or that FDIC is a large institution and that we need them?

My point was that banks are still useful because they get federal deposit insurance, while Silicon Valley startups apparently don't.

I don't see any reasons why a silicon valley startup couldn't. Lots of small bank startups sprout up all over the country. Also, Simple.com was a startup (they are now part of a very large bank) that got FDIC insurance through a partner bank.

In theory it shouldn't be too hard for a private insurance company to develop a similar product if there was enough interest from startups.

I'd love to hear you expound on that theory. I find it really unlikely that anyone would trust a private corporation in that role.

Private corporations already underwrite bonds (and related debt products like pensions, corporate loans, annuities or mortgages). A deposit in a bank is not completely different from a customer loaning money to the banking institution (at low or zero interest) in exchange for on-demand funds availability.

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