What does "disruption" look like in the banking space? Banks want the perception of immovable, confidence, reliable, resilience, etc. It's what gives them the credibility to move big money. They don't want to "move fast and break things". Some may think about digital currencies.
My warning is this: Be careful what you wish for. If we were to switch to a full digital currency, there are significant concerns that money could be allocated like a voucher, where it could be sent and only spent in a certain way. Suddenly the government decides those receiving some kind of social care allowance must spend different parts in different ways, i.e. a minimum of 50% MUST be spent on rent (an extremely enticing proposition in a recession). Perhaps there is a tax for not spending enough, or on the correct thing. Perhaps there is a micro-tax for moving it around. Maybe the micro-tax is dependant on your social credit score. The slippery slope goes on.
The only thing currently stopping this is that you can withdraw your entire wage each month and spend it however you want, without such a tax. The government or banks cannot be certain of precisely how you spend your money when using cash. The very moment cash is gone, such implements can be created and there is nothing you can do about it.
Maybe I am behind the times, but I don't like the sound of "disruption" in the banking industry. That last time I saw "disruption" was in 2008, and many people lost their homes.
Why would "the government" do that? I hate it when people talk about "the government" doing something.
The real mechanics you'd see in your example is that the business elite would begin astroturfing support from the American public, with some nonsense about helping the poor better control their finances. Nobody would believe it, and progressives would be against it. In reality it will be driven by the commercial desire to FORCE people to purchase coca cola or whatever.
SNAP, colloquially foodstamps, can only be used on certain forms of food. Frozen goods are fine, but cannot be prepared hot, even if there is not a charge or it is the exact same food product.
So my local corner grocery is allowed to sell anyone frozen food, whether they pay with SNAP or cash. But they also have a microwave that anyone can use to heat up purchased food, except for SNAP buyers. It is interpreted as unlawful for a SNAP recipient to use that microwave to heat up their subsidized food at the place that they bought it, so there is a government policy, enforced at the point of sale, severely restricting the use of SNAP.
You can think of it in terms of political parties, if it helps.
"The Democrats would never do that" then Republicans pass the bill, and the Democrats protest, but run with it and don't abolish it when back in power… Swap parties as required for your flavour of government.
The United States Congress, and the executive branch, they never do anything, to the point where you find it absurd to suggest that they would? Everything is done by the ”business elite”?
These incentives already exist. The tax code has been manipulated to encourage or discourage behavior since at least WW2. A digital currency makes a lot of these incentives easier to create and easier to enforce, but they wouldn't be new.
Cash is already practically gone in a lot of countries. I don't know anyone who uses it and don't even know how the bills look nowadays. Must have been at least 10 years since I even touched physical cash.
My main issue with cash is that I hate receiving coins. If it weren't for coins, I would try to do occasional transactions in cash, just to support something that is truly anonymous.
It might be bad but it isn't self evident. There are several contexts where it would be useful to have. To keep it generic, people can be forced to do all kinds of things. A lot of people cant manage their money. Putting the exact amount in a rent account would be better and cheaper than being put under some kind of supervision.
Rationing everything might seem like a terrible idea right now but the good times might end any moment.
There is also the some what sinister angle where adding new game mechanics to an old rather boring game could make gameplay more interesting.
Favoring a flat playing field would require we ignore how much money some people really have. (and how they got it)
For some reason it is normal for vouchers to expire. We might want you to buy vegetables but if you chose not to you don't have to. There is no need for anyone to grow vegetable rich.
The other thing stopping it is the law and the fact that the US dollar is the global reserve currency and that would be a pretty great way to ruin that
I mean, the government in the US already loves dictating what poor people can spend their money on when they get assistance.
Look at WIC for example, even in progressive California, they literally force you to buy only white eggs: https://docs.wic.ca.gov/Content/Documents/ShoppingGuide-EN-A... . You also can’t buy any cheese with taste, because you are poor and you don’t deserve good food.
The products being pointed out in this article as an attempt to disrupt banks seem to be basically the same product for a different price. Like, a high-yield savings account is just a savings account with a better price, right? How do you disrupt an industry by selling the same products? The advantage of startups is that they're more nimble, can pivot to fit the market better, and can adapt to customer requests faster. None of that applies to "selling the same product at a lower price", especially for savings accounts where stability ("the company not suddenly disappearing") is an important part of the pitch anyway
This is a very US centric article, a lot of the disruptions listed are incumbent 'big bank' products in other jurisdictions. I feel the lack of adaptability is likely a result of US market conditions/regulations rather than lack of innovation.
The EU also has put pressure on Banks for decades now to either "innovate" or "get innovated" by regulations forcing them to implement innovative ideas not coming from them.
With both having happened over time.
They also at least somewhat try to compete with Paypal on online payment on EU specific shops (not they they have much success, not just because of network effect but because a combination of their products being sub-par and them realizing that various other even less competitive/ux friendly competitors would make them more money if anyone would just be using it..., so they are in the process to "get innovated" again by forcing impl. of certain ideas related to person-to-person money transfer which have proven to work/being useful in a few countries where they/their banks did adapt them years ago.)
I think it could also be cultural. In my country people are perfectly happy to have a video chat with a bank employee about mortgages but in other country's you still need to go into a branch office for that kind of thing.
Plus hum, would you deposit large money amounts in a small fintech company ? The advantage of giant banks is that you sort of trust their size will make them able to weather a crisis, if only because so many taxpayers are involved that the government has no choice but to help.
A fintech with 1M users screwing up loan rate timings being unable to finance savings accounts and facing a run, would not have much runway and the government would simply slowly try to make people get 50c on the dollar and tell them to go back to a big bank if they want better...
It's not just size. Real banks maintain customer deposits in separate named accounts. They don't co-mingle funds like fintech companies. This makes a huge difference in the case of insolvency or any sort of fraud.
I considered doing it a few years ago with a company called Yotta, and thank God I didn’t, because they pivoted to a gambling app before losing track of user funds when one of their providers went bankrupt.
Ideally, financial regulation should be there for you in terms of bank failure without you having to trust old players and further making disruption harder. And no matter how big or small the bank, you should never put all your savings in the same bank.
One datapoint: On /r/PersonalFinanceCanada a very common advice is to save money in WealthSimple or Questrade type of online financial institutions. And people seem to be very happy with doing this.
Any financial institution that makes the act of investing money simple and legible will win some market share. I have some savings accounts in RBC Canada, and the UX seems to be designed by monkeys throwing around crayons.
Wealthsimple is a subsidiary of Power Corporation, a gigantic financial services company that has existed for 100 years. Its success is more an example of insider innovation rather than outsider disruption.
Come to Germany and try Deutsche Bank. Those monkeys are just throwing !@#$# at the wall. Moving from the US to Germany is like taking a time machine to another era when it comes to online banking.
Regulation is the racketeering. The central ringleader is the fed, who 'ease' money into thin air, bypassing the pesky annoyance of going around and collecting taxes to fund their private and public benefactors.
"Neobanks" in India, although not disruptive, are doing rather well. In general, though, the real disruption Fintech can bring is by working with existing trusted entities, not against them.
I use Fi[1] - it is a service layer on top of an existing savings account from a traditional bank, which offers things like automatic budget/expense tracking with UPI (standardized cashfree payments platform that everybody uses), quick access to debt and equity funds, credit-profiling and networth-tracking, rewards etc. It's pretty good for now at least: https://fi.money/
I can tell you right now what I want from a "bank" as a consumer: Putting the consumer first, not seventeenth or whatever I typically experience with retail banks.
As a random example, I had $3,600 stolen from one of my accounts by transactions labelled "Microsoft Online Services" or something like that. The bank reversed most, but not all of the transactions, and then had the nerve to lecture me -- an IT professional more than a bit knowledgeable about security -- about how somehow this was all my fault.
Turns out that banking security and reliability from a customer's perspective is absolutely insane. It's totally ass-backwards. It's the opposite of the Apple experience that made that particular company the biggest in the world.
1) Every field in a credit card transaction is attacker-controlled. They can put down whatever business name they want, whatever text they want, etc...
2) Every field in a transaction history is either an alias ("operating as xyz pty ltd"), an abbreviation, or just outright confusing.
3) Transaction histories and "you paid $ to X" notifications often turn up hours or days later. There's no geo-location or any other strong identifier linking these to the actual business because of (1) and (2).
4) There's no receipt details in the transaction history. "XYZ pulled $123 from your account... for reasons. It's a mystery!"
5) You can't see who's got recurring subscriptions on your account. You can't trivially cancel or block someone from pulling money from your account.
6) Some banks now show categorised graphs of what you're spending your money on, but they're guessing. They don't actually have the info of where the money went, so this is useless. You can't figure this out yourself either because of the tiny amount of info available to you.
7) You can't use your transaction history for warranty purposes, or any similar thing. You have to keep tiny pieces of paper that fade rapidly... which is I'm suuuure is just a coincidence, right? Right?
8) My bank claims I get notified if a transaction occurs on my account. This is a lie, they only notify me of some types of transactions, and not reliably either.
9) Trivial impossible-travel protections are not put in place. If my phone is used for a payment in a "physical store" while the GPS says it's in a different continent, pop up an "Approve Y/N?" prompt at a minimum!
10) You can't generally limit a vendor's access to your account if they have your credit card details. You can't restrict them to a single transaction, a fixed amount, or no-sneaky-subscriptions.
11) With shared accounts, you can't generally tell who made a transaction, even if they have individual cards and/or mobile devices. (You can sometimes, depending on the bank and the type of account, but it's not consistent. This is what happened to us: Both of us assumed the other partner set up a valid subscription.)
Etc, etc, etc....
I could go on for hours.
Unfortunately, like many people of said, the inertia of the incumbents and their moat of regulation makes this kind of thing nigh impossible with backwards compatibility.
Some org like Apple or Meta with very wide reach might be able to force vendors to jump through their hoops, which then will drag the traditional banks kicking and screaming into the future.
"You can't see who's got recurring subscriptions on your account. You can't trivially cancel or block someone from pulling money from your account"
This is because any company that has the potential for creating recurring subscriptions can do so to anyone at any time with nothing but an account number.
There is no pre-verification of authorization whatsoever. The only thing you can do is continuously monitor your bank statements and dispute the charges when you see something turn up, then hope for the best.
This system is croocked by design. Most people can't even believe it is this way , but presentations by budding fintech to small companies tout this 'feature' as the greatest thing since sliced bread.
I "solve" most these issues by using a different tool/layer (YNAB) on top of my financial institutions so that I can see all my finances in one place with a good UI and and API. I agree things should be better, I just wanted to share how I handle tracking payments and bring some level of sanity to my finances.
Why involve banks in day-to-day financial transactions? The way debit transactions work is batshit insane. One of the reputable credit card providers is much better. Amex, Chase, or Citibank are very good. Citibank offers virtual account numbers with adjustable expiration date and daily spend limit.
Most people have zero notion of what money is... let alone what banks offer as a business.
Indeed, the entrenched investment industry has become less fair (or an outright liability) to customers, but casinos are at least honest with their customers. Gambling with other peoples money was not a real financial service until relatively recently.
There is a market for a fiscally sustainable savings/investment industry, but most people with under $2m in cash can't afford the bonded fiduciary services.
Good luck, I kind of admire their ill fated ambition. =3
No one is disrupting banks because the mega banks have the sole power of creating credit out of thin air, and no upstart fintech company has this power. To gain this power requires the creation of a bank, which as you can imagine, is probably the most gate-kept activity on earth.
Andreesen talked about this in his Rogan appearance. The banks and gov brought the hammer down on crypto because it was a legitimate threat to the banking cabal which runs the American Empire.
Yes and crypto doesn’t have any inherent risk like a sitting President creating a crypto currency where he has 80% of the currency, will probably make a half billion dollars and then do a rug pull.
That’s the thing I can’t ever come to understand about crypto. It’s purely about perception of value. At least with some precious metal, it has a floor value as a function of its practical uses and abundance.
Which leads me to believe that the only thing that could be honestly said is that a crypto is purely about winners and suckers and timing.
Everyone has the power to create credit out of thin air.
What the banks have (now, due to long history) is a regularly regime where we expect the government to fix that credit when the bank gets those credit decisions wrong. In trade for that extraordinary treatment governments demand banks comply with a variety of regulations.
I’ve worked for a long time in the banking and credit space, no one I know in that industry thinks Andreeson did a credible job explaining modern banking. To knowledgeable people he came off as either fundamentally ignorant or extremely deceptive depending on your cynicism levels.
Thank you, this is something I think people really misunderstand about "money" in our system. Every time I create a "loan" for a family member I've technically created (i.e. debt) I've done the equivalent as to what a bank does to create "money". The question becomes if I can take the IOU I have from my brother, and trade that to another individual when I need to acquire goods.
The fact we have a mechanism to create trust in trading debut is about assigning and managing risk in the payment of that debt, and transferring/holding that risk over time, which is a separate aspect to the raw creation of money concern (managing total debt loads).
Can your corner store credit be used to pay taxes? How long will your corner store survive if the IRS found out you were processing transactions in your own currency?
Yeah, that "banking cabal" includes a heap of checks and balances that at least on paper stop financial crimes like scams, money laundering, market manipulation, insider trading, and they add guarantees like the relative stability of value, interest rates, and compensation if your bank does end up going bankrupt.
You get none of those protections with cryptocurrency, which is exactly what scammers, criminal organizations, and financial libertarians want.
Most of the cryptocurrency companies prove that this statement isn't entirely true though, unless I don't get it. That is, they generate cryptocurrencies out of thin air (credit) and say it has a certain value, then people pay them fiat money for those. They just generated value out of thin air and some compute cycles.
> mega banks have the sole power of creating credit out of thin air
Amazing that more people don't know this. Most people will insist until their face is red that bank credit is a "loan" with equal debits and credits on both sides of the balance sheet. Wrong. The borrower's bank account goes up. And the bank's balance sheet goes up (the loan is an asset). Viola, new money.
If you count the loan as an asset, surely you have to count it as a liability for the borrower. And the bank has to actually give the money, so they're down that money.
You can't do this indefinitely. There a lot of risk management rules and capital requirement ratios which dictate how much money you can make of "the thin air". Also you should have enough liquidity to let the customer transfer the borrowed amount outside to actually use it.
Crypto has never posed a credible threat to any aspect of the establishment, and it never will. Need proof? You don't have to go through an arduous screening process to acquire and deploy compute. The finance industry saw a pool of dumb money forming and predictably decided they'd like a slice of the action.
> an arduous screening process to acquire and deploy compute
That right there is more unlikely than crypto becoming a credible threat to the banking establishment.
If you want to see a lot of dead bodies of rich people in the street, tell the rest of the world they can't have their smartphone and laptop and Xbox and Playstation.
If there isn’t sufficient competition for commercial banks, I think they should just be regulated as privately owned utilities for the public good or just be made into a public agency. What is the point of outsourcing this service to private industry if there is no working market dynamic?
Exactly. Bankers are modern-day royalty. Banks are granted special, exclusive powers by the state to issue/counterfeit the nation's currency as loans. Banking executives are anointed by decree.
The idea of 'disrupting banks' is gaslighting because it pretends that they operate within a 'free market'.
On this point, I too have a really difficult time understanding how there is supposedly >$50 billion in treasury bonds backing Tether USDC sitting at Cantor Fitzgerald. It really does seem like the bonds backing tether just came out of thin air, unless tether was sponsored by an entity that gave them the wherewithal to obtain the bonds, for the sole purpose of moving money without KYC with tether.
Crypto fans and gold bugs miss a very important point - if their favourite currency were to get big, banks would hold it as an asset, and issue loans in exactly the same way as any other currency.
Do you want interest and the conviniance and security of a real bank? Give it to a bank to look after. There are maybe some risks, but there's also risks with a bitcoin wallet or physical bullion (theft, losing it).
Do you want money now, and can pay it back later? The bank will loan it.
Are the banks in trouble? The government can regulate, and even rescue them. A run can happen, but as long as the government and banks say the money is there, who cares about conversion to a bitcoin or bullion?
In South Africa the "big" (historically incumbent) banks were indeed disrupted by a "startup" bank relatively recently (in the last 20 years) - and this startup bank went on to in turn become one of the big banks.
There is an excellent book called "Stalking Giants" [1] that covers this story nicely. It's a fun read (especially for South Africans) and was published recently.
I don’t think disrupting banks is even possible. The time, money, and energy required is simply not realistic. There’s so many disrupt-able industries out there and I’m not even sure banking is the most beneficial one to tackle.
It’s a realistic Star Wars story where the Empire always wins because… well it’s the fucking empire. They didn’t get there by losing.
They've "lost" a few times by now. Government has propped them up.
The other side of the innovator's dilemma is the fact that the market leaders who don't stick to their current winning formula, instead risking big on a new technology, will sooner or later get it wrong and fail on their own. That's why it's a dilemma.
Not all of them were on the loosing side of that situation JPM had sold off most of risky mortgages in prior years taking a sizable haircut while other banks were supposedly raking it in. There was a ton of pressure on Jamie Dimon not to do it because JPM numbers looked bad compared to peers in those years.
They’ve been disrupted on multiple sides massively in the last twenty years. Blackrock, Vanguard and Fidelity are disruptors to their deposit and savings-account models. Quicken et al a disruptor to their lending side. Private credit, securitised lending—all taking away their balance sheet operations.
Retail banking hasn’t changed inasmuch as people like branches. But the moment you go branchless the banking options radiate, and that’s more people every day.
It is basically impossible to license a new bank in Germany and the financial regulations have become stricter over time, with a full banking license being mandatory for more and more things. It's kind of disturbing.
If you are a big bank, you already have all the licenses and can do everything so what difference does that regulation make in practice?
That exactly. Fintech forced Financial Institutions into Digital Transformation. Now they have caught up, there is no "next big thing" for Fintech. Crypto might have been it, but it killed itself by terrible UI and a never ending stream of scams and frauds. I believe there is an AI Agent Internet of Money to end Ad Revenue, but haven't found the arbitrage model yet.
Halifax is owned by Lloyds banking group, and their current app is just the exact same Lloyds app with a different logo. I know because I bank with both and the apps are identical.
Previous to the merging of online services, you are correct that Halifax had its own app and it was terrible.
But at that time Lloyds had a great app, they just hadnt unified the back end tech of all the different bank brands they own.
It wasnt disruption from startups that caused the improvement, it was the parent company taking its time to merge the decent tech it had developed for itself.
Yeah I feel like Monzo and Starling really forced the high street banks to level up their game. A friend of mine was a PM on an app at one of the big high street banks and they said the instruction from the top was explicitly to be like Monzo, and they did iterate, get better at app development, and ship a bunch of features that people like (spending notifications, in app card freezing, etc).
Bear in mind that's a measure of how backwards US banking is, not how advanced.
In the UK, I can't remember the last time I wrote or received a cheque. Maybe twice in the 17 years I've been living here, and certainly not in the last decade.
So with UK cheque usage being a tiny fraction of the US rate, there's simply no demand for it in banking apps.
US banks are weird [1]. Archaic. Slow. Filthy rich. Incompetent. And yet they're nearly impossible to disrupt due to the benefit of size. Starting a new bank is expensive, unless you want to pretend at being a real bank and letting another bank handling all of the nitty-gritty details. In which case you've now become a reseller of that bank, and will likely be even worse.
The only thing that can disrupt US banks is consumer outrage, of which there seems to be very little.
[1] Source: I've consulted for some of the largest US, European and African banks.
What about Japanese banks? They have a reputation of being terrible, justified for the little experience I had with them.
Lots of fees, bureaucratic, inconvenient opening times,...
In Japan, cash is king, and loan sharking is very prevalent. Not a very good sign for the banking system.
Note that it is now becoming increasingly possible to go cashless, though cash is still the most widely accepted option. And I think it is mostly thanks to foreign banks like Citibank.
How are they incompetent? My boring old bank has never lost my money, it sends out bill payments on time. Those are the main things I ask for it to do, and it has done them competently for decades.
As far as I can see, none of the fintech/web3/crypto-nonsense companies can be trusted to do those things well.
I don’t see what more US banks could do. I have been transferring money instantly to people online for over a decade for free. They have websites/apps, I can withdraw paper money around the world, what other utility could a “bank” provide me?
They are utilities that keep a database associating account number and dollar number.
I earn a few thousand dollars from them every year in the form of sign up bonuses, and I have never spent a dime in fees for having an account or transferring money.
If the US government offered a more protected way of saving money not subject to know-your-customer-revoke-access-to-your-property-at-anytime-under-the-guise-of-potential-criminal-activity laws, then I would use them.
They suck, pay no interest and charge the same high fees. The best alternative is investment brokerage cash accounts. They pay interest, allow you to buy short term treasuries with savings and provide checking/debt cards
I don’t know if it counts as disruption exchanging one behemoth for another but my life got a lot better when I started using a Fidelity cash management account as my bank.
Banks are the most immune to disruption, because they function so closely with government, and they are nothing without the blessing of government. And the hurdles to create your own bank are very high. Check out this great Netflix documentary "Bank of Dave": A moderately successful businessman decided to start his own bank, just to see if it could be done (and to lower fees for his local community). The results are... pretty much what you'd expect. "You can't start a bank... nobody starts a BANK!" (They just kinda... have always existed!)
It depends of the services the bank offers, because there are plenty of smaller regulated banks with deposit protection that offer savings accounts in the UK. I assume running a current account has a lot more regulatory requirements than savings?
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My warning is this: Be careful what you wish for. If we were to switch to a full digital currency, there are significant concerns that money could be allocated like a voucher, where it could be sent and only spent in a certain way. Suddenly the government decides those receiving some kind of social care allowance must spend different parts in different ways, i.e. a minimum of 50% MUST be spent on rent (an extremely enticing proposition in a recession). Perhaps there is a tax for not spending enough, or on the correct thing. Perhaps there is a micro-tax for moving it around. Maybe the micro-tax is dependant on your social credit score. The slippery slope goes on.
The only thing currently stopping this is that you can withdraw your entire wage each month and spend it however you want, without such a tax. The government or banks cannot be certain of precisely how you spend your money when using cash. The very moment cash is gone, such implements can be created and there is nothing you can do about it.
Maybe I am behind the times, but I don't like the sound of "disruption" in the banking industry. That last time I saw "disruption" was in 2008, and many people lost their homes.
The real mechanics you'd see in your example is that the business elite would begin astroturfing support from the American public, with some nonsense about helping the poor better control their finances. Nobody would believe it, and progressives would be against it. In reality it will be driven by the commercial desire to FORCE people to purchase coca cola or whatever.
SNAP, colloquially foodstamps, can only be used on certain forms of food. Frozen goods are fine, but cannot be prepared hot, even if there is not a charge or it is the exact same food product.
So my local corner grocery is allowed to sell anyone frozen food, whether they pay with SNAP or cash. But they also have a microwave that anyone can use to heat up purchased food, except for SNAP buyers. It is interpreted as unlawful for a SNAP recipient to use that microwave to heat up their subsidized food at the place that they bought it, so there is a government policy, enforced at the point of sale, severely restricting the use of SNAP.
"The Democrats would never do that" then Republicans pass the bill, and the Democrats protest, but run with it and don't abolish it when back in power… Swap parties as required for your flavour of government.
The United States Congress, and the executive branch, they never do anything, to the point where you find it absurd to suggest that they would? Everything is done by the ”business elite”?
Right now you need someone in the government administration + a court + a bank to do anything like this. With a digital dollar, you lose the last two.
They are not equivalent. A digital currency turns suggestions into orders.
Rationing everything might seem like a terrible idea right now but the good times might end any moment.
There is also the some what sinister angle where adding new game mechanics to an old rather boring game could make gameplay more interesting.
Favoring a flat playing field would require we ignore how much money some people really have. (and how they got it)
For some reason it is normal for vouchers to expire. We might want you to buy vegetables but if you chose not to you don't have to. There is no need for anyone to grow vegetable rich.
Not really. It would be similar to tax rules—not really applicable to non-American depositors.
Look at WIC for example, even in progressive California, they literally force you to buy only white eggs: https://docs.wic.ca.gov/Content/Documents/ShoppingGuide-EN-A... . You also can’t buy any cheese with taste, because you are poor and you don’t deserve good food.
Think of the cost of that stupid bureaucracy.
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With both having happened over time.
They also at least somewhat try to compete with Paypal on online payment on EU specific shops (not they they have much success, not just because of network effect but because a combination of their products being sub-par and them realizing that various other even less competitive/ux friendly competitors would make them more money if anyone would just be using it..., so they are in the process to "get innovated" again by forcing impl. of certain ideas related to person-to-person money transfer which have proven to work/being useful in a few countries where they/their banks did adapt them years ago.)
And yes it is thanks to a byzantine system of history, regulations and very few Americans travelling abroad to experience radically better systems.
The incoming market volatility will likely have winners and losers... but historically it was mostly losers (>6.4 million families and counting.) =3
A fintech with 1M users screwing up loan rate timings being unable to finance savings accounts and facing a run, would not have much runway and the government would simply slowly try to make people get 50c on the dollar and tell them to go back to a big bank if they want better...
Any financial institution that makes the act of investing money simple and legible will win some market share. I have some savings accounts in RBC Canada, and the UX seems to be designed by monkeys throwing around crayons.
The account management interfaces of Canadian banks are pretty universally terrible. Even the neo-banks like Tangerine.
Most if not all the big banks have a high yield savings account or an equivalent under different names.
And yes, it's just a savings account with an actually noteworthy interest rate. It's usually a bit below the interest rate of money market funds.
Disrupting a heavily regulated market is usually called ‘racketeering’ or ‘organized crime’.
I use Fi[1] - it is a service layer on top of an existing savings account from a traditional bank, which offers things like automatic budget/expense tracking with UPI (standardized cashfree payments platform that everybody uses), quick access to debt and equity funds, credit-profiling and networth-tracking, rewards etc. It's pretty good for now at least: https://fi.money/
As a random example, I had $3,600 stolen from one of my accounts by transactions labelled "Microsoft Online Services" or something like that. The bank reversed most, but not all of the transactions, and then had the nerve to lecture me -- an IT professional more than a bit knowledgeable about security -- about how somehow this was all my fault.
Turns out that banking security and reliability from a customer's perspective is absolutely insane. It's totally ass-backwards. It's the opposite of the Apple experience that made that particular company the biggest in the world.
1) Every field in a credit card transaction is attacker-controlled. They can put down whatever business name they want, whatever text they want, etc...
2) Every field in a transaction history is either an alias ("operating as xyz pty ltd"), an abbreviation, or just outright confusing.
3) Transaction histories and "you paid $ to X" notifications often turn up hours or days later. There's no geo-location or any other strong identifier linking these to the actual business because of (1) and (2).
4) There's no receipt details in the transaction history. "XYZ pulled $123 from your account... for reasons. It's a mystery!"
5) You can't see who's got recurring subscriptions on your account. You can't trivially cancel or block someone from pulling money from your account.
6) Some banks now show categorised graphs of what you're spending your money on, but they're guessing. They don't actually have the info of where the money went, so this is useless. You can't figure this out yourself either because of the tiny amount of info available to you.
7) You can't use your transaction history for warranty purposes, or any similar thing. You have to keep tiny pieces of paper that fade rapidly... which is I'm suuuure is just a coincidence, right? Right?
8) My bank claims I get notified if a transaction occurs on my account. This is a lie, they only notify me of some types of transactions, and not reliably either.
9) Trivial impossible-travel protections are not put in place. If my phone is used for a payment in a "physical store" while the GPS says it's in a different continent, pop up an "Approve Y/N?" prompt at a minimum!
10) You can't generally limit a vendor's access to your account if they have your credit card details. You can't restrict them to a single transaction, a fixed amount, or no-sneaky-subscriptions.
11) With shared accounts, you can't generally tell who made a transaction, even if they have individual cards and/or mobile devices. (You can sometimes, depending on the bank and the type of account, but it's not consistent. This is what happened to us: Both of us assumed the other partner set up a valid subscription.)
Etc, etc, etc....
I could go on for hours.
Unfortunately, like many people of said, the inertia of the incumbents and their moat of regulation makes this kind of thing nigh impossible with backwards compatibility.
Some org like Apple or Meta with very wide reach might be able to force vendors to jump through their hoops, which then will drag the traditional banks kicking and screaming into the future.
I'm not holding my breath.
This is because any company that has the potential for creating recurring subscriptions can do so to anyone at any time with nothing but an account number.
There is no pre-verification of authorization whatsoever. The only thing you can do is continuously monitor your bank statements and dispute the charges when you see something turn up, then hope for the best.
This system is croocked by design. Most people can't even believe it is this way , but presentations by budding fintech to small companies tout this 'feature' as the greatest thing since sliced bread.
Indeed, the entrenched investment industry has become less fair (or an outright liability) to customers, but casinos are at least honest with their customers. Gambling with other peoples money was not a real financial service until relatively recently.
There is a market for a fiscally sustainable savings/investment industry, but most people with under $2m in cash can't afford the bonded fiduciary services.
Good luck, I kind of admire their ill fated ambition. =3
Buy gold bullion, rent a bank safe deposit box, store it there. I suspect this is what comes closest to that, as of now. (Sigh.)
Andreesen talked about this in his Rogan appearance. The banks and gov brought the hammer down on crypto because it was a legitimate threat to the banking cabal which runs the American Empire.
https://fortune.com/2025/01/22/donald-trump-net-worth-memeco...
Which leads me to believe that the only thing that could be honestly said is that a crypto is purely about winners and suckers and timing.
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What the banks have (now, due to long history) is a regularly regime where we expect the government to fix that credit when the bank gets those credit decisions wrong. In trade for that extraordinary treatment governments demand banks comply with a variety of regulations.
I’ve worked for a long time in the banking and credit space, no one I know in that industry thinks Andreeson did a credible job explaining modern banking. To knowledgeable people he came off as either fundamentally ignorant or extremely deceptive depending on your cynicism levels.
The fact we have a mechanism to create trust in trading debut is about assigning and managing risk in the payment of that debt, and transferring/holding that risk over time, which is a separate aspect to the raw creation of money concern (managing total debt loads).
As another commenter noted, anyone can create "money out of thin air". Come to my corner store and buy an apple on credit. Poof!
Credit was the original money, made out of thin air, and can be by anyone.
Price instability, confiscatory and variable transaction fees, several high profile frauds -- including in a so-called "stable coin".
Crypto is its own worst enemy. Not the government.
You get none of those protections with cryptocurrency, which is exactly what scammers, criminal organizations, and financial libertarians want.
I can create money out of thin air with you, if you are willing to accept my credit worthiness.
Most of the cryptocurrency companies prove that this statement isn't entirely true though, unless I don't get it. That is, they generate cryptocurrencies out of thin air (credit) and say it has a certain value, then people pay them fiat money for those. They just generated value out of thin air and some compute cycles.
Amazing that more people don't know this. Most people will insist until their face is red that bank credit is a "loan" with equal debits and credits on both sides of the balance sheet. Wrong. The borrower's bank account goes up. And the bank's balance sheet goes up (the loan is an asset). Viola, new money.
What's amazing is that more people don't think this through. They just take the "thin air" story and that's it.
In the end both are net zero.
Every bank does that. The US has more than 4,000 of them.
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They've had a full, unrestricted bank licence since 2017 and have over 9.3m customers[1].
[1] https://en.m.wikipedia.org/wiki/Monzo
That right there is more unlikely than crypto becoming a credible threat to the banking establishment.
If you want to see a lot of dead bodies of rich people in the street, tell the rest of the world they can't have their smartphone and laptop and Xbox and Playstation.
That's a great way to get yourself killed.
The idea of 'disrupting banks' is gaslighting because it pretends that they operate within a 'free market'.
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Best not to pay much attention to Andreesen though.
Do you want interest and the conviniance and security of a real bank? Give it to a bank to look after. There are maybe some risks, but there's also risks with a bitcoin wallet or physical bullion (theft, losing it).
Do you want money now, and can pay it back later? The bank will loan it.
Are the banks in trouble? The government can regulate, and even rescue them. A run can happen, but as long as the government and banks say the money is there, who cares about conversion to a bitcoin or bullion?
There is an excellent book called "Stalking Giants" [1] that covers this story nicely. It's a fun read (especially for South Africans) and was published recently.
[1] https://www.amazon.co.za/Capitec-Stalking-Giants-T-J-Strydom...
It’s a realistic Star Wars story where the Empire always wins because… well it’s the fucking empire. They didn’t get there by losing.
The other side of the innovator's dilemma is the fact that the market leaders who don't stick to their current winning formula, instead risking big on a new technology, will sooner or later get it wrong and fail on their own. That's why it's a dilemma.
If the government bailed you out, you didn’t lose. They have yet to really lose. Thus no incentive to disrupt such a “steady” industry.
They’ve been disrupted on multiple sides massively in the last twenty years. Blackrock, Vanguard and Fidelity are disruptors to their deposit and savings-account models. Quicken et al a disruptor to their lending side. Private credit, securitised lending—all taking away their balance sheet operations.
Retail banking hasn’t changed inasmuch as people like branches. But the moment you go branchless the banking options radiate, and that’s more people every day.
There was a famous scandal with an Icelandic bank that was disrupting the market with higher interest rates.
If you are a big bank, you already have all the licenses and can do everything so what difference does that regulation make in practice?
If you could name a couple that you think stand out more usefully than banking, i'm curious.
As long as the USA stands, banks won’t change, and if the USA doesn’t stand, I’m not sure banking will even matter anymore.
My main bank account is with Halifax, everyday spend is with Starling. Then Monzo for anything risky.
Before Starling/Monzo the Halifax app was _crap_. Barely got any updates and was very basic.
Now? The Halifax app is on par with the newer banks, and sometimes even release new features before (e.g. scan cheque in to deposit).
Previous to the merging of online services, you are correct that Halifax had its own app and it was terrible. But at that time Lloyds had a great app, they just hadnt unified the back end tech of all the different bank brands they own.
It wasnt disruption from startups that caused the improvement, it was the parent company taking its time to merge the decent tech it had developed for itself.
In the UK, I can't remember the last time I wrote or received a cheque. Maybe twice in the 17 years I've been living here, and certainly not in the last decade.
So with UK cheque usage being a tiny fraction of the US rate, there's simply no demand for it in banking apps.
The over-65 age group is most likely to use them, and least likely to use an app, so you can see why it wasn't a big priority for most banks.
It's been at least 15 years since the banks stopped giving account holders chequebooks by default. If you want one you have to ask.
The only thing that can disrupt US banks is consumer outrage, of which there seems to be very little.
[1] Source: I've consulted for some of the largest US, European and African banks.
Lots of fees, bureaucratic, inconvenient opening times,...
In Japan, cash is king, and loan sharking is very prevalent. Not a very good sign for the banking system.
Note that it is now becoming increasingly possible to go cashless, though cash is still the most widely accepted option. And I think it is mostly thanks to foreign banks like Citibank.
As far as I can see, none of the fintech/web3/crypto-nonsense companies can be trusted to do those things well.
They are utilities that keep a database associating account number and dollar number.
I earn a few thousand dollars from them every year in the form of sign up bonuses, and I have never spent a dime in fees for having an account or transferring money.
If the US government offered a more protected way of saving money not subject to know-your-customer-revoke-access-to-your-property-at-anytime-under-the-guise-of-potential-criminal-activity laws, then I would use them.
Then customers scramble to find a replacement, which opens up the door to a new exciting bank, and history repeats.