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i'd start a bank with the following principles: 0. don't tell the customers that we can do anything we can't do 1. cap profits at a low percentage of the capi

i'd start a bank with the following principles: 0. don't tell the customers that we can do anything we can't do 1. cap profits at a low percentage of the capital base to discourage being irresponsible with customer money; enforce corporate austerity to keep costs very low 2. any profits over the cap are returned to customers that's it, i think. the idea is to have a bank that is rock solid (even when compared to other banks) and profitable for customers. maybe only offer one type of account, and have no minimum deposit. no fees, and offer ATM cost refunds. no personal loans. no credit cards. maybe offer a mortgage package, but probably not. no branches, obviously. customer service would be top priority. the corporate side of the bank would ride on austerity. no advertising beyond what is necessary to start the bank in motion. no luxuries for the c-suite. maybe enforce a max disparity in pay between the lowest rung and highest rung of employees to something outrageously constrained like 10 or 20k. maybe only have five or six job titles in total, if possible. fill those jobs on a first (somewhat qualified) come first serve basis and a 20 minute interview. advertise the jobs only as necessary. is this idea crazy? maybe in the banking sector it might be, but you can't trust them. they're drunk on chasing money, and they're reliably unreliable in the long term-- the article even mentions how many banks have gone under. but there are a lot of great examples of other kinds of companies (i am specifically thinking of the food wholesaler called aldi) which make their money by offering what the customer needs and nothing more. you don't need to go crazy profiteering to make robust profits...

cschneid 8y ago
No Fees, No Loans, No Credit Cards - how exactly does this bank make any money?
- gcbw2 8y ago
  You do realize all those things COST banks money in the past right? some 30+ years ago, when banks were on COBOL mostly, the system analysts would try to lower costs because you couldn't charge a fee, and if you didn't provide services that cost the bank money, the clients would move to your competition. In that time, banks had the concept of Client Acquisition Cost. Today banks uses fee for everything and everyone is ok with that, so they now have the concept of Recurring Fee Profit Per Customer. If you don't pay many fees, they treat you like garbage. So yes, it is very possible to make a profit by not only having those things but having that without fees. You will just have a harder time getting institutional investors because now they will only ever invest in predatory banks because they provide a return much faster.
  - pebers 8y ago
    > Today banks uses fee for everything and everyone is ok with that They actually don't. Most ATM fees and inter-bank payments (at least in the UK / Europe) are swallowed by the banks rather than exposed to customers. > So yes, it is very possible to make a profit by not only having those things but having that without fees. How? As far as I can tell you're describing a bank that runs deposit accounts but doesn't loan the money back - that is not obviously a profitable enterprise. Something in the whole scheme has to make some money to pay for the employees, the infrastructure, and all the other fixed costs.
    - cryoshon 8y ago
      maybe by buying inflation indexed bonds on a rolling basis. nab something like 1-2% interest on the customers' money in an extremely safe investment vehicle, then return most of that to the customer after paying off infrastructure costs. (does this work? i have no idea whatsoever)
    - gcbw2 8y ago
      AH, Europe. In the US you pay around $1.5 to $4 per withdraw, because the ATM network is a private enterprise not owned by the banks. You will get there, unfortunately. And you completely missed the point. Loaning/re-investing with volume is a very sure way to make money, and was what banks used 30+ years ago. now they pad it with fees for everything.
      - pebers 8y ago
        The ATM network here is also not owned by the banks (similarly FASTER payments, they are members of the scheme but there's a third-party that administers the network). They pay for access, but don't pass that cost on. And I did not miss that point, thank you. I just disagree with it. I don't think banks make their primary income from fees; current accounts are still basically a loss leader.
SmellTheGlove 8y ago
> that's it, i think. the idea is to have a bank that is rock solid (even when compared to other banks) and profitable for customers. maybe only offer one type of account, and have no minimum deposit. no fees, and offer ATM cost refunds. no personal loans. no credit cards. maybe offer a mortgage package, but probably not. no branches, obviously. customer service would be top priority. You're basically describing Fidelity to some degree. Their . cash management product basically has all of those features. They do offer a credit card, but word is they lose money on it to capture brokerage business. The issue is all of that is subsidized by brokerage clients, where the fee structure is still reasonable depending on what you're doing, but still mixes retail and investment banking, which I take as an implied no-no in this thread?
Jtsummers 8y ago
> maybe enforce a max disparity in pay between the lowest rung and highest rung of employees to something outrageously constrained like 10 or 20k A simple multiplier makes more sense. Top position shouldn't be making more than 10x the bottom position (or something like that). A janitor, for instance if full-time and more than just sweeping floors, is making $20-40k/year (big spread, but that's starting at $10/hour and going up to $20/hour which is a reasonable rate in much of the country for that work). So that means top brass is making $200k-400k (on a 10x multiplier between top/bottom incomes). If the big boss wants a pay raise, they have to move at least the bottom of the pay range up with them. If you add a constraint on the mean/median income, they have to bring everyone up with them.
- cryoshon 8y ago
  i see where you're coming from. i think using that framework the ideal constraint would be something like 1.2X or maybe at the very most 1.5X. this leads to overpaid janitors and underpaid execs, which is the desired result of the policy. it sucks having to find a new janitor because things get dirty in the meantime, but there are a billion execs out there and most of them should be doing very little other than keeping the ship stable most of the time. holding people's money safely is not an occupation for people who can afford to treat money carelessly in their personal lives. i know that these are "stupid" and petty things, but i think little petty things like this add up into a corporate culture if you have enough of them. the corporate culture of this hypothetical bank would do a lot to add to its branding and also its credibility. honestly i wouldn't even be proposing extreme measures like these (or advocating that the execs should be doing very little) if i didn't think it was necessary for the concept, which i've now put far too much effort into :p
- hinkley 8y ago
  Cheaper to either embezzle of buy one of those floor cleaning zambonies, lay off one of the janitors, give the rest a raise and expect them to get done in the same time. There are other perks an executive could ask for that are harder to track as total compensation.
awad 8y ago
Given those parameters, how would your bank turn any profit at all?

cschneid 8y ago

No Fees, No Loans, No Credit Cards - how exactly does this bank make any money?

gcbw2 8y ago
You do realize all those things COST banks money in the past right? some 30+ years ago, when banks were on COBOL mostly, the system analysts would try to lower costs because you couldn't charge a fee, and if you didn't provide services that cost the bank money, the clients would move to your competition. In that time, banks had the concept of Client Acquisition Cost. Today banks uses fee for everything and everyone is ok with that, so they now have the concept of Recurring Fee Profit Per Customer. If you don't pay many fees, they treat you like garbage. So yes, it is very possible to make a profit by not only having those things but having that without fees. You will just have a harder time getting institutional investors because now they will only ever invest in predatory banks because they provide a return much faster.
- pebers 8y ago
  > Today banks uses fee for everything and everyone is ok with that They actually don't. Most ATM fees and inter-bank payments (at least in the UK / Europe) are swallowed by the banks rather than exposed to customers. > So yes, it is very possible to make a profit by not only having those things but having that without fees. How? As far as I can tell you're describing a bank that runs deposit accounts but doesn't loan the money back - that is not obviously a profitable enterprise. Something in the whole scheme has to make some money to pay for the employees, the infrastructure, and all the other fixed costs.
  - cryoshon 8y ago
    maybe by buying inflation indexed bonds on a rolling basis. nab something like 1-2% interest on the customers' money in an extremely safe investment vehicle, then return most of that to the customer after paying off infrastructure costs. (does this work? i have no idea whatsoever)
  - gcbw2 8y ago
    AH, Europe. In the US you pay around $1.5 to $4 per withdraw, because the ATM network is a private enterprise not owned by the banks. You will get there, unfortunately. And you completely missed the point. Loaning/re-investing with volume is a very sure way to make money, and was what banks used 30+ years ago. now they pad it with fees for everything.
    - pebers 8y ago
      The ATM network here is also not owned by the banks (similarly FASTER payments, they are members of the scheme but there's a third-party that administers the network). They pay for access, but don't pass that cost on. And I did not miss that point, thank you. I just disagree with it. I don't think banks make their primary income from fees; current accounts are still basically a loss leader.

SmellTheGlove 8y ago

> that's it, i think. the idea is to have a bank that is rock solid (even when compared to other banks) and profitable for customers. maybe only offer one type of account, and have no minimum deposit. no fees, and offer ATM cost refunds. no personal loans. no credit cards. maybe offer a mortgage package, but probably not. no branches, obviously. customer service would be top priority. You're basically describing Fidelity to some degree. Their . cash management product basically has all of those features. They do offer a credit card, but word is they lose money on it to capture brokerage business. The issue is all of that is subsidized by brokerage clients, where the fee structure is still reasonable depending on what you're doing, but still mixes retail and investment banking, which I take as an implied no-no in this thread?

Jtsummers 8y ago

> maybe enforce a max disparity in pay between the lowest rung and highest rung of employees to something outrageously constrained like 10 or 20k A simple multiplier makes more sense. Top position shouldn't be making more than 10x the bottom position (or something like that). A janitor, for instance if full-time and more than just sweeping floors, is making $20-40k/year (big spread, but that's starting at $10/hour and going up to $20/hour which is a reasonable rate in much of the country for that work). So that means top brass is making $200k-400k (on a 10x multiplier between top/bottom incomes). If the big boss wants a pay raise, they have to move at least the bottom of the pay range up with them. If you add a constraint on the mean/median income, they have to bring everyone up with them.

cryoshon 8y ago
i see where you're coming from. i think using that framework the ideal constraint would be something like 1.2X or maybe at the very most 1.5X. this leads to overpaid janitors and underpaid execs, which is the desired result of the policy. it sucks having to find a new janitor because things get dirty in the meantime, but there are a billion execs out there and most of them should be doing very little other than keeping the ship stable most of the time. holding people's money safely is not an occupation for people who can afford to treat money carelessly in their personal lives. i know that these are "stupid" and petty things, but i think little petty things like this add up into a corporate culture if you have enough of them. the corporate culture of this hypothetical bank would do a lot to add to its branding and also its credibility. honestly i wouldn't even be proposing extreme measures like these (or advocating that the execs should be doing very little) if i didn't think it was necessary for the concept, which i've now put far too much effort into :p
hinkley 8y ago
Cheaper to either embezzle of buy one of those floor cleaning zambonies, lay off one of the janitors, give the rest a raise and expect them to get done in the same time. There are other perks an executive could ask for that are harder to track as total compensation.

awad 8y ago

Given those parameters, how would your bank turn any profit at all?