[HN Gopher] Neobanking: The Golden Opportunity
___________________________________________________________________
Neobanking: The Golden Opportunity
Author : jonhershman
Score : 24 points
Date : 2023-09-06 15:38 UTC (4 hours ago)
(HTM) web link (easilyamused.beehiiv.com)
(TXT) w3m dump (easilyamused.beehiiv.com)
| Daril wrote:
| Well ... perhaps we need an old bank system, with old values and
| principles. I have read recently a book about Amadeo Peter
| Giannini, the founder of Bank of Italy that later became Bank of
| America. A very inspiring lecture for me.
|
| In my opinion we don't need more technology or new financial
| structures and ideas, but instead some old values and ethics ...
| https://en.wikipedia.org/wiki/Amadeo_Giannini
|
| See also this brief introduction about the foundation he created
| : https://www.youtube.com/watch?v=XCYuARrz38c
| tempotemporary wrote:
| I think instilling values and ethics on society is way harder
| than making a new technology. This is why I'm rooting for
| "trustless" nature of cryptocurrencies.
| nologic01 wrote:
| I thought we have seen the end of the neobank era?
|
| https://www.forbes.com/sites/ronshevlin/2022/06/20/the-end-o...
| AdamH12113 wrote:
| _> A neobank is a technology company that provides banking
| services fully online._
|
| Not exactly a confidence builder, but go on.
|
| _> Rather than having its own bank charter, a neobank relies on
| a partner bank or "sponsor bank" to provide the regulatory
| umbrella for the company to accept customer deposits and provide
| other similar services as a bank._
|
| So... it's a middleman providing a fancy website for a real bank,
| but under a different name with minimal regulatory obligations?
| Now I'm getting nervous. Does it at least work like a normal
| bank, where they directly benefit from being a secure place to
| store money?
|
| _> Although the neobank brings in the deposits, through
| marketing and other channels, the sponsor bank is the main
| beneficiary of the interest income._
|
| Oh dear. Who's going to pay for those tech company profit
| margins, then?
|
| _> Typically, Neobanks have to rely more on the non interest
| income: account fees, transaction fees, credit cards, debit
| cards, and interchange fees._
|
| Fees and predatory loans -- every bank account holder's favorite
| things! What do I get out of this?
|
| _> To attract customers to their services, the neobank must
| offer the above services in a way that is above and beyond better
| than what is currently available. That's where technology comes
| into play._
|
| So... a _really_ fancy website?
|
| _> Traditional banks do not have a strong track record of
| innovation, technology adoption, and digital transformation.
| Between regulatory concerns, legacy systems, and the costs /
| risks of switching vendors, large technology spend scares most
| bankers away._
|
| Yeah, there are good reasons for that. People become very unhappy
| when they can't get their money.
|
| _> Neobanks do not have to worry about that._
|
| They probably should!
|
| _> They can build something from the ground up, in a slightly
| different regulatory environment_
|
| If there's one thing Silicon Valley is good at, it's rebuilding
| complex, decades-old systems from the ground up in a regulation-
| free environment without having to relearn lots of historical
| lessons the hard way.
|
| _> and use technology to serve a smaller population needs._
|
| Is this "smaller population" credulous people who want to be
| nickel-and-dimed to death so they can receive targeted
| advertising while trying to send an ACH transfer?
| linsomniac wrote:
| >Is this "smaller population" credulous people who want to be
| nickel-and-dimed to death
|
| Oddly enough, most Neobanks have significantly lower fees than
| the traditional banks. The first Neobank I tried, close to a
| decade ago now, Simple, would do this really weird thing where
| if a debit came in and you didn't have money for it, it would
| reject it at no cost rather than charging you a fee. Later, PNC
| bought Simple, and their fee structure was $35 fee per
| overdraft, capped at 4 fees per day. $140/day they could charge
| you for not having money.
|
| Assuming your questions are in good faith: The bulk of Neobank
| customers seem to be people who want better tools to manage
| their money. Most banks provide poor tools, whether that's
| online/web, mobile, or money management, most banks are just
| crap at it.
|
| Largely, I started using Simple because I wanted better tools
| for managing my money. I would set up bills and budgets and
| then I could look at the app and it would tell me a "safe to
| spend" amount, once all the bills were taken care of.
|
| Then I moved onto One Finance, which got bought by Walmart and
| they neutered a lot of their features, but similar idea.
|
| I'm now on Qube, which has a monthly fee, which I'm hoping
| helps them stay independent, but it sounds like they're
| struggling for income anyway.
|
| Qube has features like: Virtual cards for every bill, a debit
| card that can't be charged unless you approve the spend
| (optionally), family accounts (my kids have their own debit
| cards now, I can pay them for chores with a transfer),
| "envelope savings". It's actually quite compelling compared to
| my other brick and mortar accounts.
| AdamH12113 wrote:
| Those do sound like decent features, although I'm not sure
| I'd pay a monthly fee for them personally. (I did envelope
| savings via YNAB for a while; I suppose having it integrated
| directly into my bank account might make things smoother?) I
| certainly agree that banks are pretty bad about improving
| their features and general UX.
|
| My comment was largely responding to the total lack of self-
| awareness in the article, which treats concepts like "tech
| company rebuilds complex legacy system" and "unregulated
| banking innovation" as being obviously good things in and of
| themselves. (The article seems to be part of a web3 blog, so
| no surprises there.) Taking the idea more seriously, I would
| expect neobanks to fail in a few different ways:
|
| 1. Being bought out or cut off by actual banks who decide
| they can offer new services directly without giving middlemen
| a cut of the money.
|
| 2. Enshittification. Lure in customers with low fees, then
| gradually add to the fees and start harvesting personal
| information for advertising.
|
| 3. Fraud. Seems to be a default option for many ambitious go-
| getters handling other people's money in a lightly-regulated
| environment.
|
| I'm feeling rather cynical about both tech and finance these
| days, but I wouldn't mind being wrong for a change.
| [deleted]
| paulddraper wrote:
| > So... a really fancy website?
|
| Basically.
|
| Which isn't a high bar, if you've ever use a banking portal.
| tlarkworthy wrote:
| Neobanks can specialize and handle money in a specific niche they
| happen to understand at a deeper level than a generic bank can.
| This is the point, the specialization and being about to do risk
| calculations on baroque asset classes.
|
| (I work for a ycombinator startup for customers including but not
| limited to neobanks https://www.taktile.com/)
| jjevanoorschot wrote:
| The assumption that neobanks always use a sponsor bank is false.
| Most European neobanks have a full banking license.
| chowells wrote:
| Ok, but my credit unions all offer all those "other services"
| that I use without fees. Where is there room to compete with them
| on cost?
| Scoundreller wrote:
| Sometimes $0 is too high of a price and they could be paying
| you.
|
| (Your CU probably pays you indirectly. Mine gives me a $5 share
| yearly just for existing and I don't generate any direct fees).
|
| Kinda like how stock brokers should be paying you to have your
| stocks on deposit with them because they make money loaning
| them out to others.
|
| Which is partly how "neo"-brokers could zero out trading
| commissions. Lending out meme stocks to short sellers is
| especially profitable.
| jonhershman wrote:
| There's a golden opportunity for tech led banking. 1) less
| barriers to entry, 2) more cost effective, 3) only need small
| customer bases. While neobanks and traditional banks offer most
| of the same products, their business models are different. I
| write about it more here:
| https://easilyamused.beehiiv.com/p/neobanks-vs-traditional-b...
| quirkot wrote:
| > Since the Neobank doesn't have its own FDIC insurance and
| bank charter, the neobank customer's deposits actually sit on
| the sponsor bank's balance sheet
|
| Are you saying that "neobanks" do not record the deposits as a
| liability? Or that they do not record the cash as assets? I
| don't understand what you are trying to say.
|
| Are there any public "neobanks" you can point to so that we can
| see the financials as you describe them?
| tomrod wrote:
| I think they are describing what is termed "brokered
| deposits" -- like your Starbucks gift card account isn't
| managed by Starbucks, but rather a (usually large) bank on
| the backend which treats brokered deposits differently than
| unbrokered (standard) deposits.
| quirkot wrote:
| Hmmm, possibly. However you are describing an operational
| reality and the author was using financial reporting terms.
| And specifically if something like "people gave a bunch of
| money to what they thought was us" isn't on the balance
| sheet, it's a big red fraud flag
| cweagans wrote:
| Getting a bank charter and FDIC insurance is a _huge_
| undertaking, so neobanks are usually not actually banks. They
| are technology companies that have _partnered_ with banks or
| are customers of banking-as-a-service providers (Hydrogen,
| Stripe Treasury, and similar).
|
| The banking partners have their own bank charter and FDIC
| insurance, but the technology company itself does not. If you
| go to most neobank websites, you can scroll to the bottom and
| see a disclosure along the lines of "Banking services
| provided by The Bancorp Bank, N.A. or Stride Bank, N.A.,
| Members FDIC".
| quirkot wrote:
| That doesn't have anything to do with financial statements.
| If you're Joe's Lawn Service and someone hands you money,
| it goes on your balance sheet. That's how accounting works,
| every penny gets (you know) accounted for. Otherwise how do
| these "neobanks" know who they owe?
| fakedang wrote:
| Depends highly on jurisdiction. In Asia, almost every big bank
| has realized that neobanks just have a fancy UI built on their
| (big bank's) backend, so now they've begun developing everything
| inhouse with better terms and efficacy than neobanks. In fact,
| that's part of the reason many neobanks are getting shafted this
| downturn season: https://the-ken.com/the-nutgraf/two-regulators-
| usher-in-fint...
___________________________________________________________________
(page generated 2023-09-06 20:00 UTC)