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You don't think that there is room for a new high-tech bank to step in and eat the lunch of the big banks? If you started a bank from scratch, built with modern

You don't think that there is room for a new high-tech bank to step in and eat the lunch of the big banks? If you started a bank from scratch, built with modern technology, you could provide all kinds of valuable services and adapt to change much more quickly. Pretty much every service provided, particularly on the web, is some application that screenscrapes CICS screens or reads data from VSAM. These applications a tricky to build and take much more time than they should.

jacquesm 16y ago
Starting a bank from scratch will have you worry about other things than the technology of your IT department, mostly to do with solvency and staying clear of SO. Sure, at some level the technology will come in to play but nobody will 'start a high tech bank'. For instance, ING direct (one of the efforts of the banking industry to leverage the use of technology) was jump started from the legacy ING systems and as far as I know still ties in to them for all of their back-end stuff. When I was the 'systems administrator' for the corporate division of a bank (in 1986 or so) we had daily rounds of getting the signatures of the various people responsible that the totals for the night batch runs were correct. That's the sort of responsibility you're talking about, I can't imagine that an MD5 or some digital signature would be sufficient today, it's all about procedures and accountability, emphatically not about technology. I got one of the first PCs the bank bought on account of our project manager being very forward thinking but nobody ever thought of it as more than a curiosity and something that might be a handy replacement for the terminals. That attitude has changed a bit but not by much and that's 25 years.
- logicalmind 16y ago
  Well, nobody would have built another search engine either, but google did it. Part of the problem is the legacy mindset of the higher ups at financial institutions combined with their extremely conservative nature. I currently work in a fairly large financial institution, giving them a web presence for various services and the backend system is no longer a mainframe but an AS/400. Though it still runs COBOL-based apps, so it's really no different than the standard mainframe.
  - jacquesm 16y ago
    I'm not sure I follow you on the google link here. Google built another search engine, which ran on a cluster of PCs and did so more efficiently than the big competitor at the time, AltaVista, which ran (afaik) on a cluster of Dec Alphas. Because google needed lot of horsepower and had a tight budget they came up with some pretty clever packaging ideas for their cluster. In that sense both these companies took the best route to a solution. Now a search engine is materially different from a bank in that if something goes wrong in a bank the potential damage (not just to the bank, but also to the customers of the bank) is enormous. A search engine that spits out 'wrong' results is still a search engine. A bank that doesn't know where your money went is no longer a bank (at least, not for very long). Financial institutions rely heavily on their image of reliability, much more so than any web company.
    - logicalmind 16y ago
      I was speaking more about the mentality that led to the business opportunity that google exploited. More so than the technology. The mentality at that time was that "nobody would build another search engine". Any time I hear someone say "nobody would..." I think about how that mentality allows you to exploit that opportunity. In this case, I'm referring to banking. You've got an industry that is based almost entirely on legacy systems that has not evolved with the progress of technology. As correctly pointed out, you would not want to modify an existing legacy system to move it to a new technology, which is why nobody has done so. What I'm referring to is a new, from scratch, bank with new technology. One that would allow you to disconnect from the current banking model and allow you to offer services that nobody could provide with today's legacy systems. This combined with the fact that if you ask any bank customer they will tell you how much they hate their bank and hate the service. Sounds like it's ripe for the pickings with the right investment, investors and people.
      - jacquesm 16y ago
        I don't think the mentality was that 'nobody would build another search engine', it may have been around where you were at the time but I know plenty of people - myself included - that were wondering about building another search engine. Also, altavista definitely wasn't the only player. Even today, with google as established as it is I'm pretty sure there are at least several hundred people involved in building new search engines. Whether one of them replaces google at any point in time remains to be seen, but it's definitely not classed as a 'hopeless problem'. As for the banking bit. You are missing my point, nobody builds a bank because of the technology, people found new banks because of the money. If that means adapting old, tried and true technology to jump trough new hoops then that's a cost of business. Bankers are conservative by nature, not because they like it but because it makes very good business sense when you're a bank. It's no coincidence that banks, insurance companies and governments are the areas where the mainframe is still dominant. I'm really not sure what kind of services you could offer with a 'new' software stack that you could not offer with the old one. Bank transfers are routinely done in seconds between banks, you can pay with everything from credit cards to mobile phones and computers, they seem to have done a remarkable job at adapting to new tech while remaining conservative at heart. People hate their banks mostly for the costs and for the lack of human interest, rarely if ever because of the lack of technology. In fact, I could do with less technology and better human interaction.
srveit 16y ago
It looks like at least one company is trying this: https://www.banksimple.net/about/ https://www.banksimple.net/about/
- jacquesm 16y ago
  That doesn't say anything about their tech, and they're not open for business (yet). It will be interesting to see how they fare.
patrickk 16y ago
Starting a new bank - if only it were that simple. I actually looked into the requirements for establishing a new bank (not in US) and the requirements were so prohibitive (tens of millions in reserve from day one, virtually obliged that no single shareholder hold more than 5-10% stake), not to mention meeting regulatory requirements like BASEL in Europe and SOX in the US mean that the big banks own the market in many countries, with no fear of swifter moving newcomers "eating their lunch". Not to mention people's resistance to change, especially with something as important as their money. And that is only on the retail banking side. It's even worse in i-banking, with the bigger investment banks making more money than ever on Wall Street, as if the crash of 2008 never happened. They may be crooks, but they have the money and influence to make sure the laws get written in their favour - see https://www.banksimple.net/blog/2010/07/21/banks-strike-back/ https://www.banksimple.net/blog/2010/07/21/banks-strike-back... (there was an article on HN recently around this post.) Also looked into providing the "valuable services" you mention too, a la Mint.com (no equivalent where I live) and this is something I believe there is certain potential (you will have to build a service that taps into banks online portals and offers more useful features than the banks themselves, e.g. account aggregation, financial product comparisons, tailored financial advice etc.) I think the future is one where virtually ordinary transactions will be done online (paying bills, transferring funds), possibly on smartphones, and where you only go into a branch to get a mortgage or something major - and possibly not even then. Of course you can do all this already online, but the world is still very cash and cheque based outside of the US. It will be a while yet until the majority of people are willing to do 100% of their banking with an institution that is 100% web-based.

jacquesm 16y ago

Starting a bank from scratch will have you worry about other things than the technology of your IT department, mostly to do with solvency and staying clear of SO. Sure, at some level the technology will come in to play but nobody will 'start a high tech bank'. For instance, ING direct (one of the efforts of the banking industry to leverage the use of technology) was jump started from the legacy ING systems and as far as I know still ties in to them for all of their back-end stuff. When I was the 'systems administrator' for the corporate division of a bank (in 1986 or so) we had daily rounds of getting the signatures of the various people responsible that the totals for the night batch runs were correct. That's the sort of responsibility you're talking about, I can't imagine that an MD5 or some digital signature would be sufficient today, it's all about procedures and accountability, emphatically not about technology. I got one of the first PCs the bank bought on account of our project manager being very forward thinking but nobody ever thought of it as more than a curiosity and something that might be a handy replacement for the terminals. That attitude has changed a bit but not by much and that's 25 years.

logicalmind 16y ago
Well, nobody would have built another search engine either, but google did it. Part of the problem is the legacy mindset of the higher ups at financial institutions combined with their extremely conservative nature. I currently work in a fairly large financial institution, giving them a web presence for various services and the backend system is no longer a mainframe but an AS/400. Though it still runs COBOL-based apps, so it's really no different than the standard mainframe.
- jacquesm 16y ago
  I'm not sure I follow you on the google link here. Google built another search engine, which ran on a cluster of PCs and did so more efficiently than the big competitor at the time, AltaVista, which ran (afaik) on a cluster of Dec Alphas. Because google needed lot of horsepower and had a tight budget they came up with some pretty clever packaging ideas for their cluster. In that sense both these companies took the best route to a solution. Now a search engine is materially different from a bank in that if something goes wrong in a bank the potential damage (not just to the bank, but also to the customers of the bank) is enormous. A search engine that spits out 'wrong' results is still a search engine. A bank that doesn't know where your money went is no longer a bank (at least, not for very long). Financial institutions rely heavily on their image of reliability, much more so than any web company.
  - logicalmind 16y ago
    I was speaking more about the mentality that led to the business opportunity that google exploited. More so than the technology. The mentality at that time was that "nobody would build another search engine". Any time I hear someone say "nobody would..." I think about how that mentality allows you to exploit that opportunity. In this case, I'm referring to banking. You've got an industry that is based almost entirely on legacy systems that has not evolved with the progress of technology. As correctly pointed out, you would not want to modify an existing legacy system to move it to a new technology, which is why nobody has done so. What I'm referring to is a new, from scratch, bank with new technology. One that would allow you to disconnect from the current banking model and allow you to offer services that nobody could provide with today's legacy systems. This combined with the fact that if you ask any bank customer they will tell you how much they hate their bank and hate the service. Sounds like it's ripe for the pickings with the right investment, investors and people.
    - jacquesm 16y ago
      I don't think the mentality was that 'nobody would build another search engine', it may have been around where you were at the time but I know plenty of people - myself included - that were wondering about building another search engine. Also, altavista definitely wasn't the only player. Even today, with google as established as it is I'm pretty sure there are at least several hundred people involved in building new search engines. Whether one of them replaces google at any point in time remains to be seen, but it's definitely not classed as a 'hopeless problem'. As for the banking bit. You are missing my point, nobody builds a bank because of the technology, people found new banks because of the money. If that means adapting old, tried and true technology to jump trough new hoops then that's a cost of business. Bankers are conservative by nature, not because they like it but because it makes very good business sense when you're a bank. It's no coincidence that banks, insurance companies and governments are the areas where the mainframe is still dominant. I'm really not sure what kind of services you could offer with a 'new' software stack that you could not offer with the old one. Bank transfers are routinely done in seconds between banks, you can pay with everything from credit cards to mobile phones and computers, they seem to have done a remarkable job at adapting to new tech while remaining conservative at heart. People hate their banks mostly for the costs and for the lack of human interest, rarely if ever because of the lack of technology. In fact, I could do with less technology and better human interaction.

srveit 16y ago

It looks like at least one company is trying this: https://www.banksimple.net/about/ https://www.banksimple.net/about/

jacquesm 16y ago
That doesn't say anything about their tech, and they're not open for business (yet). It will be interesting to see how they fare.

patrickk 16y ago

Starting a new bank - if only it were that simple. I actually looked into the requirements for establishing a new bank (not in US) and the requirements were so prohibitive (tens of millions in reserve from day one, virtually obliged that no single shareholder hold more than 5-10% stake), not to mention meeting regulatory requirements like BASEL in Europe and SOX in the US mean that the big banks own the market in many countries, with no fear of swifter moving newcomers "eating their lunch". Not to mention people's resistance to change, especially with something as important as their money. And that is only on the retail banking side. It's even worse in i-banking, with the bigger investment banks making more money than ever on Wall Street, as if the crash of 2008 never happened. They may be crooks, but they have the money and influence to make sure the laws get written in their favour - see https://www.banksimple.net/blog/2010/07/21/banks-strike-back/ https://www.banksimple.net/blog/2010/07/21/banks-strike-back... (there was an article on HN recently around this post.) Also looked into providing the "valuable services" you mention too, a la Mint.com (no equivalent where I live) and this is something I believe there is certain potential (you will have to build a service that taps into banks online portals and offers more useful features than the banks themselves, e.g. account aggregation, financial product comparisons, tailored financial advice etc.) I think the future is one where virtually ordinary transactions will be done online (paying bills, transferring funds), possibly on smartphones, and where you only go into a branch to get a mortgage or something major - and possibly not even then. Of course you can do all this already online, but the world is still very cash and cheque based outside of the US. It will be a while yet until the majority of people are willing to do 100% of their banking with an institution that is 100% web-based.