[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)