[HN Gopher] Banks beware, Amazon and Walmart are cracking the co...
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Banks beware, Amazon and Walmart are cracking the code for finance
Author : bryanrasmussen
Score : 116 points
Date : 2021-09-19 11:23 UTC (11 hours ago)
(HTM) web link (www.reuters.com)
(TXT) w3m dump (www.reuters.com)
| ur-whale wrote:
| The question is increasingly: what is the actual purpose of a
| retail bank in 2021?
|
| There was a time when banks and the work they did actually
| provided added value, historically: - keeping
| your physical money safe - providing safe and regulated
| accounting - giving out loans based on existing deposits
| - giving their customer financial advice
|
| In 2021, it turns out: who needs these things at all?
| - almost all money is digital - any accounting need an
| individual will ever need can be provided by the combo of a phone
| and a $50 computer sleeping in a data center - AFAIU
| retail banks don't really need deposits to give out loans these
| days: loans usually gets resold on the open market almost as soon
| as they are granted. - there are *way* better places to
| get financial advice than going to me Henry H Banker at the local
| BofA desk.
| after_care wrote:
| Real question, where are my direct deposit "paychecks" suppose
| to go besides a retail bank? Once they have the money sitting
| in accounts they might as well lend it or something.
| oblio wrote:
| What's the alternative? Cryptocurrencies?
| rattlesnakedave wrote:
| Yes, if you are brave enough to self custody.
| twic wrote:
| My main use of retail banking is for transactions. Having a
| bank account means that my employer can pay money into it, i
| can use a card to withdraw cash from it, or make payments from
| it, i can authorise direct debits against it, and i can use a
| web interface to make transfers and review my transactions.
|
| When i have money to save, or i need to borrow, i don't go to
| my bank. I go to whoever gives me the best rate.
|
| I'd be interested to know what fraction of bank customers are
| like me.
|
| For the features i use, the web interface is probably fairly
| easy, but all the rest involves integrations with payment
| networks, which are not entirely trivial [1]. Money may all be
| digital, but as anyone who has ever worked with computers
| knows, that doesn't mean it's easy. So for me, the purpose of a
| retail bank is mostly to provide reliable implementations of a
| bunch of API clients.
|
| [1] although i led a team which build a large chunk of a system
| for making transfers, and if i can do it it can't be _that_
| hard
| JohnFen wrote:
| A retail bank in the US is covered by FDIC or NCUA, which means
| that (up to reasonable limits), my deposit is guaranteed. If
| the bank goes belly up or someone steals all the money, I will
| not suffer a loss.
|
| That's a very important benefit that is independent of whether
| or not the money is digital.
| xwdv wrote:
| Amazon and Walmart can both benefit from the powerful synergies
| from their retail operations if they decide to become banks,
| don't see how traditional banks can easily compete. Square too is
| heading down this path, arguably even faster.
| deshpand wrote:
| Banks also have a huge cost of supporting legacy systems in
| Cobol, SAS.. even some 'modern' systems in Java/Python are a
| huge mess.
|
| https://www.efinancialcareers.com/news/2021/02/jpmorgan-stil...
|
| They mostly talk about being tech companies but don't take the
| time to put in the required investments.
| adaml_623 wrote:
| This type of article confuses me because it ignores China and
| India. Specific case. Alibaba copied Amazon's business model. But
| then it successfully spins off Alipay (later Ant Financial and
| Ant Group). And before the government crackdown/policy changes at
| the end of 2020 Ant almost successfully IPO'd at a valuation of
| $314 billion.
|
| Ant's business model involved payments, insurance and lending and
| was fantastically profitable because Ant leveraged its data about
| user payments to make efficient risk decisions. If the CCP hadn't
| decided Ant was too big (and violating data rules) then it would
| probably be continuing to grow.
|
| I don't think any of this is obscure so I don't understand why
| the article doesn't point out that Amazon and Walmart aren't
| trying something that hasn't been done before.
| JohnFen wrote:
| I wonder if the banking laws in China, India, and the US may be
| so different as to be incomparable in this regard. The vast
| majority of the difficulty appears to be regulatory in nature,
| and I imagine that each nation has its own unique regulatory
| flavor.
| kerng wrote:
| Well, wait until one of the big tech companies discovers crypto
| currencies and starts offering DeFi solutions built into their
| platforms.
| eyeball wrote:
| they'll just use their control of the regulators to crush the
| competition.
|
| this will go about as well as amazon / jp morgan / berkshire
| taking over healthcare.
| smnrchrds wrote:
| Canada's largest grocery chain, Loblaws corporation, had a vision
| of the grocery store becoming the hub for a diverse set of
| services. Under their PC brand, they offered chequing and saving
| accounts in the form of an online bank, credit cards, travel
| insurance, cell plans, etc. But in the end it didn't quite work
| out for them financially. They have been in the process of
| winding down their services and focusing on their core business
| as of a few years ago.
| omnicognate wrote:
| Similar experience for Tesco in the UK:
| https://www.bbc.co.uk/news/business-57973960
| fartcannon wrote:
| Car insurance, too!
| [deleted]
| no_butterscotch wrote:
| Like they cracked Healthcare?
| ozzythecat wrote:
| This is a rhetorical question. I think American healthcare is a
| different beast altogether from banking and credit. I could be
| wrong, but I'm not convinced breaking into financing is as hard
| of a beast as healthcare. For example, auto companies do often
| have a financial division that offers loans, often times being
| very competitive with or beating your bank or credit union.
|
| I would argue this might be far easier for Amazon to pull off
| in the US or Western countries vs. countries like China or
| India.
| anderson1993 wrote:
| The Waltons (Walmart) already own the regional Arvest Bank with
| numerous locations in Arkansas, Missouri, Kansas, and Oklahoma so
| they're no strangers to finance.
| A4ET8a8uTh0 wrote:
| Ehh, I heard that song before and arguably there is a threat
| posed to banks' market power and influence from current breed of
| fintech and new entrants, but the more time I spend in banking,
| the less chance I see for a serious disruption.
|
| I was initially going to cite an interview I did with a high
| level executive of a regional bank, whose entire view on the
| matter could be paraphrased as 'apps may be cool for kids, but
| when you want a full service, you want a bank'. I personally felt
| it was a little.. arrogant, but I understand where he was coming
| from.
|
| The compliance burden alone itself can be painful for new
| players.
|
| Then again, Amazon already has experience and they are clearly
| doing relatively well ( their OFAC settlement was minimal -
| https://home.treasury.gov/policy-issues/financial-sanctions/...
| ).
|
| The executives should take note.
|
| edit: added 'alone' the burden sentence.
| BenoitEssiambre wrote:
| While it's true that compliance, know your customer, anti-
| money laundering laws are the crux of this, who knows more
| about their customers than big tech companies?
|
| This is an area where big tech actually has a built-in
| advantage.
| twic wrote:
| Who does worse at customer service than big tech companies?
| secondaryacct wrote:
| Probably but on my side of banking our main attraction is
| capital concentration.
|
| If nothing else, being enormous and focused entirely on
| getting more in to redirect to productive investments is the
| main "secret" to crack.
|
| All fintech companies miss this point: they can get sexy, get
| a bit of retail, but when you want to buy a supermarket or
| expand a business you already have, you dont need software.
| You need capital.
|
| AWS and Walmart may have some, and could convince clients to
| switch to them, but they re not going to be anything else
| than one more big pool of money to lend and collect.
| bob1029 wrote:
| We've been working in the banking industry for almost a decade
| now. I don't think any of our customers have ever expressed
| serious concern about technology companies breaking into their
| market and taking deposits from their institutions.
|
| Business banking (esp. loans) is where I see virtually zero
| competition emerging any time soon. The complexity and value
| proposition around managing these kinds of customers is extremely
| nasty compared to the consumer side of the shop.
|
| This whole thing is a fairly complex equation, but I would boil
| the barrier-to-entry down to a 50/50 between regulations &
| customer needs.
|
| From a customer standpoint, the most meaningful specific deposits
| are going to come from your most painful customers. Our clients
| are not looking for victory in numbers with razor-thin margins.
| They prefer to find whales obtained by way of exceptional
| customer service.
|
| When it comes to money, customer service matters a fuck load when
| you approach a certain level of stakes. I don't think Amazon and
| Walmart are prepared the engage their customers in a way that
| will distinguish them from the incumbents. Walmart is already
| host to Woodforest National Bank (their largest retail partner),
| who is only able to serve a very narrow band of the consumer
| banking market. I can see a potential partnership emerging here.
| I don't see Walmart doing it on their own, and I certainly don't
| see it taking the market by storm. Amazon, even more so.
| thepangolino wrote:
| Couldn't those big chains at east in theory abuse the
| fractional reserve system by giving themselves 0% interest
| loans?
| dodobirdlord wrote:
| Short answer is no, regulators aren't stupid.
| jasode wrote:
| There's been a long history of non-finance companies branching
| out into finance.
|
| - Sears: had Allstate for insurance and Discover Card for credit.
| Unlike most "branded" credit-cards, Sears did its own
| underwriting for the Discover Card i.e. they owned the Greentrust
| bank behind that card. (That is unlike Amazon Prime card being
| underwritten by Chase Bank.)
|
| - G.E. General Electric: financial services GE Capital like loans
| and leases
|
| I remember finding out that many music stores use GE Capital to
| finance the inventory of all their guitars hanging on the wall.
| (Industry lingo of "floor planning".[1]) Sort of strange to
| realize that a lightbulb company has a bigger subsidiary that
| sells financial services. It's more profitable to make money by
| selling money than by manufacturing lightbulbs.
|
| [1]
| https://www.google.com/search?q=ge+capital+floorplan+financi...
| zarzavat wrote:
| Famously Sony made more from insurance than electronics.
| robocat wrote:
| That was back in 2010 when although the financial services
| was a small percentage of revenue it made up a good
| percentage of profit - nice graph:
| http://www.fromedome.com/2011/11/sony-profits/
|
| Now the segment that makes the most is games:
| https://www.statista.com/statistics/297533/sony-sales-
| worldw... which shows a beautiful graph showing just how
| variably some of their business segments generate
| profits/losses per year - notice how segments disappear from,
| or appear on, the graph.
|
| Edit: Disclaimer: I am not a financial expert, but your fact
| seemed a little odd to be true. Financial services at Sony do
| look reliably profitable (perhaps mostly recurring revenue
| and use reinsurance so predictable profits?)
| asdfasgasdgasdg wrote:
| Talking of this, wasn't the issue for OnlyFans related to
| payment processing and banking? What's to stop a company like
| that from buying a bank and setting up its own credit card? Is
| the main issue that it would still be a visa/master/discover
| card, and therefore they would have the same payment processing
| woes?
| jasode wrote:
| _> , wasn't the issue for OnlyFans related to payment
| processing and banking? What's to stop a company like that
| from buying a bank and setting up its own credit card?_
|
| Because having an "OnlyFans Bank" to underwrite the "OnlyFans
| Mastercard" wouldn't accomplish anything because the _credit-
| card _network__ [1] was also getting more restrictive about
| the adult content rules.
|
| The major separate entities in the chain of making credit
| cards work:
|
| - processors, gateways: e.g. early PayPal, Stripe,
|
| - payment _networks_ : e.g. Mastercard, Visa
|
| - merchant banks: e.g. Wells Fargo Merchant Services,
| Worldpay
|
| Getting transactions rejected by _any_ of those 3 middlemen
| would be a showstopper for many businesses. If heightened
| fears about child pornography and sex trafficking causes _all
| 3 financial layers_ to crack down with stricter rules, it
| would be impossible for most businesses like OnlyFans to
| overcome it.
|
| So being your own bank to get around Wells Fargo Merchant
| rules doesn't solve the issue for _Mastercard 's rules_
| unless you're willing to create a _new payment communications
| network_ and convince millions of consumers to apply for a
| new credit-card using that unfamiliar network. It 's not
| impossible as Discover Card and American Express did it but
| even they don't have the wide acceptance of Mastercard/Visa.
|
| [1] Mastercard _network_ cracking down on adult content: http
| s://www.mastercard.com/news/perspectives/2021/protecting...
| onlyrealcuzzo wrote:
| Right - but why can't you issue your own card, on your own
| bank, and process your own payments?
|
| People will do a lot for good porn.
| gruez wrote:
| Because you're not going to get awkward questions if
| people found out you had a mastercard, but you are going
| to get it if you had a onlyfans credit card.
| onlyrealcuzzo wrote:
| How are people going to find out? It could be an online
| only thing.
| gruez wrote:
| try explaining that to your spouse.
| jakeva wrote:
| not everyone is married
| throaway46546 wrote:
| credit reports
| CapitalistCartr wrote:
| I hadn't thought of such a card. Now I want one.
| jcrawfordor wrote:
| You need to actually clear the payment with the
| payer/drawer's bank eventually. This means either having
| a direct relationship with all of the banks your
| customers might foreseeable use, or using a clearinghouse
| with pre-established relationships. One of the functions
| served by the payment networks (actually the merchant
| processors under their agreements with the acquirers I
| believe, it gets confusing in the details) is managing
| relationships with clearinghouses such as FedACH. These
| clearinghouses are hesitant to allow access to parties
| other than established financial institutions because of
| the risk involved, and they are likely to judge "starting
| our own payment network for adult content" as very high
| risk for a variety of reasons.
|
| It is conceptually possible for an adult entertainment
| website to sidestep the payment processors by clearing
| directly through ACH or an EFT network or something, but
| this is high risk for the bank offering the service
| (ODFI) and so access to ACH clearing is generally more
| difficult to obtain than merchant banking. Banks are not
| really any more willing to work with adult entertainment
| than credit card networks, and some of the material
| problems that make credit card networks hesitant
| (unusually high levels of chargebacks and use of stolen
| card information) are even bigger problems for
| ACH/EFT/etc. which are "less reversible" than credit card
| payments.
|
| The ease of processing credit cards today is sort of a
| newer invention - you used to have to fill out an
| application and usually meet with a banker for an
| interview to get approval to open a merchant account,
| because the bank that offers the account is taking on
| risk on your behalf. Newer processors like Square and
| Stripe have gotten rid of these requirements, but
| presumably incur more expense and use more automation in
| managing the risk than conventional banks (as a result
| they often charge higher fees than a merchant account at
| a good low-cost commercial bank).
|
| A somewhat related example was the Federal Reserve's
| decision several years ago to not grant a master account
| to a Colorado-based credit union formed specifically for
| the cannabis industry---if memory serves, the primary
| concern the FRB identified was that the low
| diversification of such a financial institution would
| make it especially fragile in response to economic or
| regulatory changes, creating a very high risk of the
| credit union going insolvent if there was some shift in
| the cannabis industry. I imagine an FRB would raise the
| same concern in relation to adult entertainment, which is
| also in a complex and often unclear regulatory
| environment due to the history of US obscenity laws, the
| often cash-based nature of the industry, and much of the
| industry being overseas.
| bobthepanda wrote:
| It's possible that FedNow, when it comes into existence,
| may sidestep this problem entirely by allowing direct
| payments between accounts.
| robocat wrote:
| > unusually high levels of chargebacks and use of stolen
| card information
|
| Design the onlyfans credit card bank to be unusually
| secure (e.g. non-phone 2factor auth) and unusually
| profitable for processors (higher commissions to
| processors, higher value clients a la Amex).
| jcrawfordor wrote:
| The stolen cards are ones issued by other banks, though.
| Unless you propose that every OF customer has to open an
| account at OF's specific bank, in which case you end up
| with the same problems about how they transfer funds in.
| jasode wrote:
| _> but why can't you issue your own card, on your own
| bank, and process your own payments?_
|
| _> How are people going to find out? It could be an
| online only thing._
|
| Ok, I guess you're asking about the creating a _non-_
| Visa _non-_ Mastercard credit-card? If you're avoiding
| all mainstream payment networks of Visa/Mastercard/Amex
| then your problem really reduces to an internal OnlyFans
| ledger accounts. Sort of like the old days before credit-
| cards where each grocery store had their own "ledger
| accounts" for each customer.
|
| If so, to simplify it, you really don't need the
| complexity of creating a "OnlyFans credit-card" as the
| problem reduces down to establishing _direct payments_ to
| OnlyFans (e.g. bank-to-bank electronic funds transfer).
| This might be an option. E.g. Amazon has a way for
| customers to enter bank account numbers and routing info
| for ACH payments from a customer 's checking account: htt
| ps://www.amazon.com/gp/help/customer/display.html?nodeId=
| ...
|
| I'm guessing that OnlyFans entertained that idea for a
| few minutes and concluded less than 1% of customers would
| willingly enter direct bank account info so that OnlyFans
| can bypass Visa/Mastercard. Whatever the tiny percentage
| is, it's a drastic enough reduction in customers to make
| it unviable financially for both the content creators and
| OnlyFans.
|
| If we're not talking about _direct payments_ but back to
| the idea "credit-cards" as in an "OnlyFans credit-
| card"... we're strongly implying transactions on the
| mainstream networks Visa/Mastercard. Otherwise, there's
| no reason for the extra layer of complexity of "credit"
| and issuing a "card" to go with it that can only be used
| at one service.
| 1123581321 wrote:
| It's a good question. I'd guess a combination of the
| expense of operating all three, obtaining the banking
| license and surviving US Treasury Dep't scrutiny and
| pressure.
|
| In 2021 it's probably much easier and cheaper to accept
| cryptocurrency and let the user figure out how to move
| the money from their bank account to their wallet(s).
| mkr-hn wrote:
| All the practical means of handling cryptocurrency
| involve exchanges where, sooner or later, regulatory
| scrutiny and the risk tolerance people have with money
| makes them as complicated as banks. This is the same
| problem people have making new programming languages and
| frameworks to address existing problems: sooner or later,
| they accumulate all the problems of the old system trying
| to address the limits of their simple designs.
| 1123581321 wrote:
| Yes, I'm sorry you misunderstood; I was only saying it'd
| be easier to take pre-existing cryptocurrency, since the
| two exchanges required are less complicated than running
| an entire processor, payments network and bank.
| Performing the conversion to the currency is pushed off
| on the user and some other exchange service, and
| converting currency after the sale just needs to be
| correctly reported.
|
| Creating an entire cryptocurrency ecosystem as an
| alternative to taking CCBill would not go well, I agree.
| judge2020 wrote:
| In theory nothing, in practice setting up a bank is a big
| undertaking and a national bank more so.
| repomies69 wrote:
| Nothing with banking is technically that difficult, it is
| about licenses and permissions.
| salawat wrote:
| Hahahahaha.
|
| No.
|
| You have no idea whatsoever. The financial services
| industry might as well be a surveillance mechanism for
| the U.S. government at this point. Compliance/AML/KYC is
| huge, complex, and a giant pain in the arse.
| mcny wrote:
| Absolutely. Simple Bank tried so hard and so long. It
| just isn't easy to start a bank and probably for a good
| reason. For every well intentioned startup like simple,
| there will probably be a thousand snake oil salespeople.
| TheOnly92 wrote:
| The problem is in the end, you still need to move the money
| from the customer's bank to yours. That can happen either
| directly, or through an intermediary. If you have a direct
| relationship with the customer's bank, then all is well and
| dandy, but as a risky business you'd probably have a hard
| time doing this kind of direct relationship. The easier
| alternative is to find an intermediary bank that has
| connections to a lot of major banks. If you can actually find
| an intermediary bank willing to do business with you, i.e.
| open a corresponding account for your business, then you can
| pretty much accept payments. The trouble is if other banks
| find out that your intermediary bank is doing business with
| you, they might be able to force your intermediary bank to
| cut off that relation. I believe Bitfinex allegedly had that
| issue. So in the end, unless the customer is directly handing
| in cash to you, you're pretty much at someone's mercy,
| regardless of what channel the payment is performed in. If
| you want to setup a new credit card brand, better make sure
| the customer's bank is willing to send you the funds when its
| time for settlement.
| repomies69 wrote:
| > What's to stop a company like that from buying a bank and
| setting up its own credit card?
|
| They can set up their own credit card _network_ , sure. If
| they want to issue their own credit card with existing
| network like visa or mastercard, they need permission from
| visa or mastercard.
|
| These payment networks have huge network effects. I can't
| imagine anyone really entering that market.
| oblio wrote:
| Car dealerships get most of their profits from after sales
| service and financing.
| after_care wrote:
| Car dealerships usually make those financing profits as
| (essentially) commission.
| hellbannedguy wrote:
| That is mainly due to manufactures hiding info from their own
| customers, and Independant shops. That whole Right to Repair.
|
| The typical consumer doesn't like paying $290.00 plus hr.,
| the minute the warranty ends. I hope they don't like being
| fleeced? I see them sipping Starbucks in the lounge, and
| wonder sometimes.
| ashtonkem wrote:
| GE is one of my go to examples of the financialization of
| American capitalism. Pretty much every company once it crosses
| a certain size starts looking more like a bank than the goods
| and/or services company that existed before hand. This is both
| bad as a country, we need goods and services not GE financial
| operations, and often quite bad for the company as everything
| else ends up getting deprioritized and/or sold off.
|
| It's also worth pointing out that this financial wing almost
| killed GE in 2008. Obviously consumer spending (e.g. washing
| machines) was going to drop during that time, but the financial
| wing of the company almost bankrupted them and ended up getting
| them removed from the Dow Jones Industrial Average.
| Dokaz wrote:
| Not just every company.
|
| In GDP or GVA calculations any region on the planet that gets
| prosperous by building goods, food, mining, whatever, sees a
| jump in real estate activity that sooner or later grows as
| large or larger than the sector that produced the growth.
| After that people coast whether in a company or in a county
| or a district or a state. Until competion either pushes them
| out of their comfort zone or crushes them.
| jeltz wrote:
| And in Sweden we have IKEA and ICA (a local supermarket chain)
| who both have their own banks.
| throwaway894345 wrote:
| > Sort of strange to realize that a lightbulb company has a
| bigger subsidiary that sells financial services. It's more
| profitable to make money selling money than manufacturing
| lightbulbs.
|
| GE sells a lot more than lightbulbs and financial products.
| joeblubaugh wrote:
| GE doesn't sell light bulbs any more. The name is licensed
| the way it used to be for IBM laptops.
|
| https://www.npr.org/2020/05/27/863378300/general-electric-
| ma...
| jasode wrote:
| _> GE sells a lot more than lightbulbs _
|
| :-)
|
| With a _" lightbulb company"_, I was just using a rhetorical
| device of describing something in _banal and obvious
| adjectives_ to the average consumer to contrast it with
| something non-obvious.
|
| E.g. The _" hamburger company"_ McDonald's is actually one of
| the largest real estate holders that makes more money from
| land rent than food. Adding later clarifications of _"
| McDonalds sells more than just hamburgers such as salads and
| eggs in English muffins"_ isn't necessary for most readers.
| bombcar wrote:
| To be precise on the McDonald's thing, it _rents the land
| to the franchises_ and extracts the franchisee profits that
| way as no doubt it 's tax efficient.
| andi999 wrote:
| Yes. The statement 'makes more money from rent than from
| sales of food' is dubious if the rent is paid by food
| sales.
| lotsofpulp wrote:
| How is it tax efficient? Why do all franchisors not
| behave in the same manner? The land under hotels are very
| rarely owned by the hotel brands themselves.
| quartesixte wrote:
| I thought the real reason was to exert control over
| franchisors, so that in the event of a McDonald's going
| rogue they can revoke the lease and end the franchise.
| gruez wrote:
| >so that in the event of a McDonald's going rogue they
| can revoke the lease and end the franchise
|
| Why they can't revoke the franchise agreement?
| quartesixte wrote:
| They do both, but revoking the lease allows for far
| greater control I believe
| smokelegend wrote:
| Sure they can, the amount of money generated from these
| actions you honestly believe McDonald's doesn't have the
| best contract lawyers to enforce their TOS.
|
| Play by Mc D's rules or no happy meal for you....
| gibspaulding wrote:
| >GE sells a lot more than lightbulbs and financial products
|
| They designed the GAU 8 Avenger that's used on the A-10
| "Warthog" along with a bunch of other modern Gatling guns.
|
| https://en.m.wikipedia.org/wiki/GAU-8_Avenger
| techsupporter wrote:
| > Sears: had Allstate for insurance and Discover Card for
| credit. Unlike most "branded" credit-cards, Sears did its own
| underwriting for the Discover Card i.e. they owned the
| Greentrust bank
|
| This was a fairly common thing to do, as you point out, for
| department stores. As far as I'm aware, Target was the last
| holdout department store owning its own bank, Retailers (then
| Target) National Bank, through which it issued the RedCard and
| RedCard Visa, and sold to TDBank. Macy's had Department Stores
| National Bank, which it sold to Citi, and so on.
| clairity wrote:
| nordstrom also had its own bank but divested it to charles
| schwab in 2017. apparently its credit card assets went to td
| bank.
| JackFr wrote:
| Don't forget GMAC - General Motors Acceptance Corp. The joke
| back then was that GM was a perennial money loser and only
| existed as a loss leader, just so GMAC could make loans.
| dasyatidprime wrote:
| And GMAC Bank later became Ally Bank.
| Spooky23 wrote:
| This is happening in software too. Office 365 is functions
| like car insurance for business activity. The products change
| pretty glacially, with most enhancements focused on
| increasing stickiness and upsell (PowerBI).
|
| I was talking to a customer, a tax policy guru about some of
| the challenges with corporate taxation. My suggestion to him
| was to implement an excise tax on O365 and GSuite, as those
| products are probably more reliable metrics of business
| activity than payroll and other measures. Plus, Microsoft is
| better at compliance than most tax authorities.
| laurent92 wrote:
| I'm not sure. I mean, that would make O365/Gmail more
| expensive (indirectly, but cost optimizers in companies
| would see this as a direct cost), and I'm not sure people
| would pay more for them that $5/user/month. In fact,
| companies pay way more for SSO and videochat than for their
| emails...
| maxerickson wrote:
| The pace of updates to office has accelerated with 365
| though. Excel has seen lots of updates the last year or
| two.
| breakfastduck wrote:
| I actually _prefer_ the subscription model but _only_ for
| enterprise.
|
| It makes it a hell of a lot easier for the admins too,
| just buy a license for each user and it works. No
| worrying about license, needing to update to latest
| version etc in big jumps. Plus many people were paying
| for additional 'support' anyway.
|
| As a non enterprise end user, it's the worst thing in the
| world. Like Adobe stuff for example. I'm sure the model
| works fine for businesses, but it's horrific as an
| average user. I just want Photoshop on my pc. I dont care
| if its the latest version. I just need a version of it
| that I can buy and use and not have to budget in forever.
| skeeter2020 wrote:
| Today's Toyota isn't a money-loser, but it's more of a
| finance company than a automaker.
| jeeeb wrote:
| I was interested and fact checked this. Financial services
| are a small part of total revenue (about 1/12). They seem
| to be somewhat more profitable and make up about 1/4 of
| operating income. Fundamentally though Toyota is able to
| sell financial services because it sells cars. So Toyota I
| would say is very much a car company with a nice side
| hustle selling financial services.
|
| Source:
| https://global.toyota/pages/global_toyota/ir/financial-
| resul... (See Supplement 2)
| dharmab wrote:
| I suspect a number of niche car and powersports brands exist
| in part as sales leads for financing.
| travoc wrote:
| Banking has always been about trust... something that Amazon
| will never have.
| MisterBastahrd wrote:
| That's an online message board thing, not an actual flesh and
| blood human being thing.
|
| If Amazon was so terrible as a brand, then there wouldn't be
| so many Prime users and Bezos wouldn't be making a billion
| every few days.
| drstewart wrote:
| According to who?
|
| https://www.businessinsider.com/amazon-is-us-most-loved-
| bran...
|
| Yet again, outspoken privacy critics on the internet (read:
| HN, reddit, and Twitter) don't necessarily represent reality
| spicybright wrote:
| People grumble about amazon yet rely on them for so many of
| their shopping needs anyways.
|
| If they make all of banking more convenient and streamlined
| like they do with shopping, a lot of people will jump on
| board.
| delecti wrote:
| I'm not sure why you think that, because Amazon is an
| _incredibly_ trusted brand. And having worked there, in their
| advertising division no less, even I would be open to
| trusting them with financial services.
|
| I would prefer not to because I don't want to contribute to
| their domination of every market under the sun, but I'd pick
| Amazon over some traditional banks (namely Wells Fargo or
| BoA) if I were forced to make that decision.
| travoc wrote:
| Being trusted to deliver counterfeit goods that are easily
| returned is very different from being trusted to steward
| one's life savings.
| DangitBobby wrote:
| I think you are vastly over-estimating how many people
| have this issue with Amazon. I can count on zero hands
| the number of counterfeit products I've gotten from
| Amazon.
|
| I hear people complain about being a customer of other
| online retailers, but I can't recall any conversations
| where someone complained about their experience with
| Amazon.
|
| You order it, it ships, it's the thing you ordered.
| Otherwise they refund you, or they ship you a new one and
| you keep the item they sent you be mistake.
| nebula8804 wrote:
| How do you know for sure that everything you have ordered
| isn't counterfeit? The counterfeits have gotten extremely
| good. Many times you don't discover until a long time
| later and other times you may just think the poor
| operation of the device is expected and you are now
| thinking this brand is junk.
|
| Sure if it is just some plastic widget maybe its not so
| bad but at the end of the day the money is going not to
| the innovator but to some third party who had no business
| inserting themselves into this transaction.
|
| Just the idea that what I receive is not what I expected
| to order is enough to doubt whatever arrives at my door.
| DangitBobby wrote:
| > How do you know for sure that everything you have
| ordered isn't counterfeit? The counterfeits have gotten
| extremely good.
|
| Trust in a brand isn't based on what I got, it's based on
| what I think I got.
| tshaddox wrote:
| Even all the people complaining about them in tech
| circles seem to either be delivering second-hand
| complaints, or are buying like huge amounts of SD cards
| and got one supposedly counterfeit batch one time. I am
| fairly convinced that the counterfeit goods thing is
| something that happens vanishingly rarely, probably
| similar to the people who get an expensive camera box
| containing nothing but a rock.
| kube-system wrote:
| It really depends on what you're ordering. I suspect
| they've put a lot of effort into solving this issue since
| I stopped using Amazon several years ago, but I had a
| couple issues in short succession that really got on my
| nerves. For me, it seemed to be niche Asian brands that
| were problematic. I got some counterfeit ham radio gear,
| and some counterfeit RC gear.
|
| One of my parents recently got a gray market laptop was
| advertised as new from Dell, but the laptop that showed
| up had specs different from its service tag.
|
| It's shady crap like this that has made me happy to shop
| at specialty retailers. Sure, Amazon makes it easy to
| return, but I've found it easier to buy things from
| specialty retailers instead of processing returns.
| Especially now that many retailers have competitive
| pricing, quick shipping, and store pickup.
| bcrosby95 wrote:
| I've bought roughly 6 electronics things from amazon over
| the past 10 years (really, mostly 5 years ago) and had
| problems with 3 of those things.
|
| 2 were not the right product (in the right packaging), 1
| was obviously opened but not marked as opened when I
| bought it. I've never received something as obviously
| wrong as "a rock instead of a camera".
|
| My experiences may have been exceptional but they are my
| own. Now I just buy from Best Buy instead.
| DangitBobby wrote:
| That makes sense. My point was just that in general
| Amazon is a trusted brand.
| agumonkey wrote:
| SONY's banking branch was a big part of its revenue IIRC.
| beerandt wrote:
| All manufacturers (or wholesalers or retailers) that grow big
| enough will run into the problem of: their potential market
| running out of customers that can pay cash up front, or easily
| obtain credit to purchase their product.
|
| Even "cash" accounts at things like trade businesses, where the
| account is more about convenience and workflow (and the
| professional getting paid only after the work is done) than it
| is credit or financing, are taking on _some_ risk of non-
| payment at the end of the month in order to make business flow
| much faster and more smoothly, than it otherwise would.
|
| It's just a matter of what industries or businesses have the
| capital and the will, as well as the right risk models and
| opportunity costs to try and implement it all "in-house" or as
| a subsidiary.
| lordnacho wrote:
| Doesn't Tesco in the UK have a bank product? Can't say I hear
| much about it when I shop there.
|
| Makes sense though, why not be a lender as well? Then people can
| get their groceries before they get their monthly paycheck.
|
| Also on the payments side, why pay the card company when you can
| make your own card?
|
| These aren't new observations though, anyone looking at a
| supermarket would think of these things.
|
| Big issue is regulatory. There's a heck of a lot of hoops to jump
| through to get a bank license.
| dazc wrote:
| Tesco Bank is pretty much a branding of Royal Bank of Scotland
| (RBS) rather than their own financial service company though.
|
| I used to have the Tesco credit card which was useful for the
| reward points but after trying to report a rogue transaction I
| found the customer service quite awful and left.
|
| Dunno if that was always the case of if they have just gone
| down hill of late?
| cm2187 wrote:
| Just to be clear, what makes a bank is not really lending, anyone
| can lend money (you might not necessarily be able to write a
| mortgage depending on the jurisdiction though). And there are
| lots of non-banks that lend money routinely, starting with car
| makers credit arms.
|
| What makes a bank is taking deposits (that's what requires a
| banking license). And banks are competitive at lending because
| they can fund cheaply with deposits.
| pram wrote:
| You misunderstand. Lending is what makes a bank. When a bank
| (in the US) lends, it is creating new money that didn't exist
| before due to fractional reserve requirements.
|
| If you made a loan you'd effectively have a 100% reserve
| requirement to do so, while a bank currently needs 0% backing
| in deposits. You cannot make new money.
| cm2187 wrote:
| I don't misunderstand and given my profession I should know.
| Loans are not a regulated activity. You can make loans. Any
| corporation can make loans. Taking deposits is what requires
| a banking license.
| vishnugupta wrote:
| > banks are competitive at lending because they can fund
| cheaply with deposits.
|
| This was my understanding until I read this article[1] which
| essentially asserts that banks' primary function is to create
| money to be lent out. True, banks did start out as deposit
| taking entities which they still continue. However, banks don't
| make much profit from deposits. In fact deposits, being
| liabilities, cost them money to keep them safe. They keep those
| deposits in short term fixed investment funds, most of the long
| term loans made by a bank are from money created by itself.
|
| That article is from none other than the Bank of England.
|
| [1] https://www.bankofengland.co.uk/quarterly-
| bulletin/2014/q1/m...
| danielmarkbruce wrote:
| This is a pretty bad explanation. In almost all cases the
| deposit created is taken, sent elsewhere and reduces a loan
| somewhere. The document does explain this a little way down.
|
| The original statement about cheaply funding loans with
| deposits is spot on. Look at any of the big four banks - they
| all have over a trillion dollars of deposits at 10-15 bps
| which they then lend at a few %.
| imtringued wrote:
| I've never seen my bank take my deposits and tell me,
| "sorry, they have been lent out".
|
| They might use them for funding but that doesn't mean they
| actually need them.
| cm2187 wrote:
| Yes they do need them, because they are cheap and long
| term (technically they are overnight but in practice,
| banks and regulators assume limited retail run-on-the-
| bank, so they are effectively long term liabilities).
|
| If you don't have deposits, the only three ways a bank
| can fund are
|
| a) issuing term wholesale funding (i.e. issuing bonds, no
| liquidity risk but expensive, if not uneconomical),
|
| b) short term wholesale funding (money markets, cheap but
| dangerous, what happens if the wholesale funding market
| dries up like in 2008?). Banks are now prevented from
| taking too much of that risk by the introduction of the
| LCR ratio (which requires them to keep in liquid asset
| the equivalent of a 30 days bank run) and the NSFR ratio
| (which forces banks to maintain as much long term (>1y)
| liabilities than long term assets),
|
| c) and the "originate and distribute" model, i.e. make
| some loans and resell almost immediately them through
| securitisation. Though banks are now required to retain
| much of the credit risk and are therefore limited in how
| much they can do that by their capital requirements.
|
| And yes, your deposit has been lent out, at least 70-80%
| of it. That's because everyone assumes not all retail
| customers will request their money back the same day (and
| if they do the bank is dead).
| salawat wrote:
| The continued threat of bank-runs is the central
| absurdity of our monetary system. "Everybody keep your
| money in the bank because if you don't, bad things will
| happen!"
|
| Personally, I think the only significant disruption would
| be that enterprises, instead of only having to get buy-in
| from bankers, would have to sell the public on direct
| investment.
|
| Though I've been known to be an economic stick in the
| mud.
| cm2187 wrote:
| But that's the thing with deposits, people treat it as
| cash and don't even think of the credit risk. Companies
| are free to offer investments to the general public right
| now, but it is also heavily regulated to make sure that
| investors understand the risk they are taking. Banks do
| not have to at the expense of tens of thousands of pages
| of regulation in every jurisdiction (and that's probably
| low estimate).
| vishnugupta wrote:
| Similar assertion (i.e., money is created by commercial
| banks) is made in this book too [1]. It is in the context
| of working of The Federal Reserve. The author worked is a
| former fed trader.
|
| > the deposit created is taken, sent elsewhere and reduces
| a loan somewhere.
|
| Sure, but that doesn't imply the converse (i.e., a loan is
| made from deposit), does it?
|
| > they all have over a trillion dollars of deposits at
| 10-15 bps which they then lend at a few %.
|
| It is not clear (to me at least) if the money they lent out
| is indeed from the deposits they took.
|
| [1] https://www.goodreads.com/book/show/56863052-central-
| banking...
| [deleted]
| egberts1 wrote:
| Well, with Green Dot, WalMart is making huge inroad into general
| banking.
| civilized wrote:
| With every pile of money trying to become a finance company these
| days, is it any wonder that interest rates are at record lows?
| mkr-hn wrote:
| It probably has more to do with the Fed rate and monetary
| policy than competition.
| kevmo314 wrote:
| I worked in finance for a bit. The knowledge moat for tech is far
| greater than that of finance. I wouldn't be surprised if a tech
| company breaks into finance and traditional finance companies
| can't compete with the tech moat.
| mkr-hn wrote:
| Challenger banks who launched thinking this often end up owned
| by or serviced by traditional banks. Some of that thinking is
| at least making its way into traditional banking, but it's a
| slow process with entrenched interests fighting every step of
| the way.
| hakfoo wrote:
| I had always heard the problem wasn't necessarily the
| knowledge, it's more that _starting a bank from zero_ in the
| US is extremely labour-intensive; something about having to
| get licensed by every state with its own slightly different
| set of rules.
|
| The SOP seems to be to find some dinky bank with an
| established license and acquire it to get a seat at the big-
| boy table. I suppose, then, it inevitably leads to a culture
| clash as the "Bank people" can say to the "Tech people" that
| the moment they stop playing ball, the whole thing crashes
| down.
| j-krieger wrote:
| "Few products escape the Amazon touch," the Duke said.
| "Books, the cloud, foodstuffs, servers, credit cards,
| insurance, tv, music - the most prosaic and the most exotic
| . . . even our poor handmade products from local mom and pop
| stores. Anything Amazon will transport [...]. But all
| fades before our personal data.
|
| The altered quote above may be a bit of a pessimistic quip, but I
| think in this day and age, nothing comes quite as close to
| Herbert's `Spice` as peoples personal data. Gather enough of it,
| and you do not only have the ability to glance into an
| individual's past, but into their near future, too.
|
| Amazon the company offers a lot of services. Soon you'll be
| living in your Amazon Home [1], ordering food from Amazon
| Groceries and household items from Amazon Basics. You'll be
| working at some Amazon owned company [2][3], drive an Amazon
| vehicle [4] and pay for your Amazon insurance[5] with your Amazon
| issued credit card.
|
| I find it harrowing that antitrust laws have been neutered so
| much in current times, where a breakup of the few well known
| Megacorps would have been necessary a decade ago. Amazon, Apple,
| Microsoft, etc. are slowly creeping their way into every aspect
| of life where there's a chance for monetary gain. Currently, a
| few select ventures are so large they can either outprice any
| meaningful competition for years until they fold, by just eating
| temporary monetary losses; or swallow them and incorporating
| their spectrum of products into their own lines. Even worse, some
| control the one and only marketplace on which competition can
| spawn, giving them the ability to shut down their opposition for
| inane reasons. Look at the FlickType keyboard on the Apple Watch
| for an example.
|
| [1]: They started two years ago by selling tiny houses. More will
| surely follow: https://www.housingwire.com/articles/49260-you-
| can-now-buy-y...
|
| [2] Amazon owns more than 100 companies
| https://www.forex.com/en/market-analysis/latest-research/wha....
|
| [3] Amazon employs 1 Million people - In the US alone.
| https://www.nbcnews.com/business/business-news/amazon-now-em....
|
| [4] Did you know that Amazon sells and lends cars?
| https://www.amazon.com/Vehicles/b?ie=UTF8&node=10677469011
|
| [5]
| https://www.insurancebusinessmag.com/us/news/technology/amaz...
| wintermutestwin wrote:
| Question: why is "breakup" always touted as the solution to
| these free market destroying monopolies? Why isn't the fix
| regulation and aggressive enforcement?
| j-krieger wrote:
| Because you can't force a 'free' market by introducing even
| more regulation and aggressive enforcement?
| salawat wrote:
| The breakup implies the latter. Most people think in Ends,
| not Means.
| madengr wrote:
| "We have just folded space from China... Many machines in
| China... New machines..".
| rhexs wrote:
| Right, but at least the boomers voting for both parties (and
| the corresponding elected boomers allowing this) will get to
| continue buying new RVs each year with pensions and inflated
| retirement accounts that only exist due to allowed tech
| consolidation and monetary policy we will one day look back in
| horror upon.
| photochemsyn wrote:
| This seems to have a central data-harvesting angle according to
| the article. The threat to banks is described as:
|
| "And that means they'll be further away from the mountains of
| data others are hoovering up about the preferences and behaviours
| of their customers - data that could be crucial in giving them an
| edge over banks in financial services."
|
| "Embedded financial services takes the cross-sell concept to new
| heights. It's predicated on a deep software-based ongoing data
| relationship with the consumer and business," said Matt Harris, a
| partner at investor Bain Capital Ventures."
|
| This is how you build a dystopian panopticon, isn't it?
| JohnFen wrote:
| Yes. We already live in a panopticon, but I think we should at
| least resist making it larger.
|
| My reaction to the trend is that while I'm forced into an
| intimate relationship with an established bank in order to
| function in society, there's no way that I'm willing to take on
| additional intimate relationships with the likes of FAANGs and
| Walmarts.
|
| But I also know that most people don't have the same
| reservation.
| salawat wrote:
| Yep. Got it in one.
| literallyaduck wrote:
| https://www.nytimes.com/2007/03/17/business/17bank.html
|
| It was right to stop them then, and it is right to stop them now.
| bombcar wrote:
| Banks do two things:
|
| 1. Help you spend money you have
|
| 2. Help you spend money you don't have
|
| The second is profitable the first is almost money-losing.
|
| But the second attracts undesirables that can be hard to get rid
| of.
| DamnYuppie wrote:
| I think you are grossly mistaken. Banks make way more money
| helping you buy things you can't afford. Just look at how much
| more they make off of credit than they do traditional banking
| services.
| bombcar wrote:
| Which is why I said the second is profitable ...
|
| But it brings the risks of those who don't pay back which
| they do their best to avoid but regulatory rules come into
| play
| lifeisstillgood wrote:
| There is a vast gulf between "finance company" and "regulated
| bank".
|
| The levels of regulation is huge, and basically _culture
| changing._
|
| Coinbase is basically trying to avoid becoming a bank. If it
| finds it have to then, hey great more competition, but really I
| think the idea that "startup attitude" will be allowed by
| regulators or (because regulators basically follow what society
| has decided it wants from its banks over decades of scandals and
| abuse) what the market actually wants
|
| As an example, there are loads of (US) fintech startups that let
| you store some money and pay at a shop. Because these are not
| banks and debit cards, they charge the customer nothing but can
| scalp the merchant who can do nothing. The fintechs are just
| playing regulatory arbitrage. It might end soon in which case
| dozens will drop out and the biggest get bought by real banks for
| their brand name and cool factor.
| lifeisstillgood wrote:
| So I should have been clear - afaik the fintechs are "banks"
| but as "small banks" are regulated more lightly. One such issue
| is the amount they can charge the merchant in a debit card
| transaction. There in lies the arbitrage.
| hn_throwaway_99 wrote:
| This isn't really true. In the US, if someone is "letting you
| store money", and it's _real_ , actual money, the deposit has
| to be held at a bank or a credit union. Thus, the way many
| fintechs work right now is that they have a partner bank, which
| holds the bank charter, that keeps FDIC insured deposits.
|
| Down the road, though, I think you'll see some big fintechs buy
| up one of the many small, regional banks just to get their bank
| charter. Most of the underlying tech at a bank runs on a "Core
| Banking" system from one of a couple of players (FIS, Fiserv,
| etc), but down the road I could easily see more modern core
| banking tech come out from a fintech so they could then control
| everything from backend to frontend experience and take all of
| the profits.
| davchana wrote:
| Oh wow, ok, for curiosity, when I have a Shell Gas Gift Card,
| or balance in Starbucks app, or walmart or dominos gift card,
| somehow that money is being held in a real bank? Just asking.
| tomrod wrote:
| The term is "brokered deposits" -- Starbucks has a bank
| backing the app (not sure they publicize which one). But
| the bank doesn't declare those deposits under their
| control, can't loan it out, etc.
| Nbox9 wrote:
| Gift card balances do not have to be held by a bank. If it
| were held by a bank you'd need to provide ID for purchasing
| one and there would be more regulation around _gifting_
| them. You can't just _give_ someone a bank account.
|
| However, balances held by PayPal or Venmo? Yeah those are
| backed by a bank.
| h2odragon wrote:
| you may find this useful:
| https://whyisthisinteresting.substack.com/p/the-gift-card-
| ec...
| sjburt wrote:
| Yes and no. In your examples, there card has been sold by
| an individual merchant and there is not an individual
| account at a bank for your gift card. There is certainly
| money in Shell's bank, and a liability on Shell's balance
| sheet labelled "unused gift cards". If Shell were to go
| bankrupt, it would be quite difficult for you to recover
| the gift card balance.
|
| On the other hand, there are "universal gift cards" that
| work as a debit card and can be used anywhere (that
| supports that type of debit card). These would require a
| bank to hold the balance; when the card is used the money
| would go from that bank to the merchant's bank.
| enos_feedler wrote:
| If they buy up the bank charter, doesn't that mean the whole
| company then becomes regulated like a bank charter? Wouldn't
| it make more sense to just continue using their services?
| vageli wrote:
| > If they buy up the bank charter, doesn't that mean the
| whole company then becomes regulated like a bank charter?
| Wouldn't it make more sense to just continue using their
| services?
|
| It likely would remain its own entity, similar to how
| banking and credit services are provided by different
| subsidiaries at places like Capital One.
| jcrawfordor wrote:
| For exactly this reason, US financial regulators recognize
| Bank Holding Company (BHC) as a separate category from
| chartered banks. BHCs are subject to a more limited form of
| the examination banks receive, in order to ensure that they
| are not in danger of going insolvent (leading to the
| insolvency of their bank subsidiary). But the examination
| for BHCs is nonetheless much lighterweight.
|
| Interestingly, all BHCs are regulated by the Federal
| Reserve (which is not true of banks proper, which may
| "choose" their regulator within certain limits from the
| FRS, OCC, and FDIC, occasionally others). There are some
| advantages that come from the FRS's approach to BHCs,
| including better access to FRS lending. As a result, many
| "banks" today, in terms of consumer branding, are actually
| BHCs that do all of their actual banking (depository
| financial institution/DFI) within a subsidiary.
|
| "Bancorp" is a somewhat informal term for BHCs, so "banks"
| with bancorp in the name are often (but not always, the
| term has older uses) actually BHCs.
| [deleted]
| hn_throwaway_99 wrote:
| Well, the point is, right now, when a fintech partners with
| a bank, they _still_ have to go through an extensive due
| diligence process and conform to all the regulations that
| are relevant to them because the bank is still on the hook
| from a regulatory viewpoint.
|
| For example, let's say you're a fintech like Chime, which
| partners with The Bancorp Bank and Stride Bank to actually
| store deposits. When you open an account at Chime, Chime is
| responsible for _just_ as much required KYC (Know Your
| Customer regulations) for account holders as if you opened
| directly with a bank. The partner banks demand periodic
| audits of the KYC processes because if anything is
| deficient, it 's the bank's charter that is on the line.
| amelius wrote:
| Paypal cracked it years ago, so it shouldn't be too difficult for
| a company like Amazon.
| hypothesis wrote:
| > Mercedes drivers can get their cars to pay for their fuel.
|
| Does anyone know more about this? Is this for EVs only? Or is
| there a standard of some sorts or is it a custom
| agreement/implementation between car manufacturer and gas
| stations?
| jlangemeier wrote:
| It's essentially speedpass built into the car, nothing
| exciting.
|
| Just like the Amazon BNPL scheme is just Layaway or a store
| credit card gussied up in Tech speak.
|
| The whole article is just asking a bunch of fintech venture
| capitalists where they want the market to go; and throwing in a
| quick blurb from a JP Morgan/Chase exec to make it feel well
| rounded. Most banks and credit unions aren't JP Morgan, BoA,
| and Wells Fargo.
| hypothesis wrote:
| I see.
|
| It's a bit sad that everyone is so hung onto full-auto
| driving and car subscription models, that no one is trying to
| make current things more practical.
|
| I'm not even talking about gas cars, is there an EV car that
| can park itself at charger and charge without human being
| involved?
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