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Another answer: because regular banks are awful to deal with. They don't have nice APIs to just move money around. They apply velocity limits at surprising time

• kaushikktiwari 7y ago
  Def, you are right. Everyone is building on top of legacy banks but you hope that slowly the customer orientation will change to positive largely by better tech and more competition! Thanks for reading and appreciate the comment!
• theturtletalks 7y ago
  Another reason is the horrible interest rates. Wealthfront and Robinhood are offering "bank" accounts that have 1.8% APY that is FDIC insured. If your business has a high turnover month-to-month, that money used to pay your bills can accumulate interest.
  • toomuchtodo 7y ago
    I bank with a shitty national bank (long story, need access to Zelle/P2P transfers). My emergency fund is 6 months expenses, low 5 figures. 150-200 basis points of interest annually is trivial when 1 or 2 wire fees ($20) to get access to those funds same day blows away all of interest gains over 6-12 months. If interest rate mattered to folks, more would move to providers offering higher rates (you see this sprouting up with Credit Karma, Personal Capital, and other fintech startups offering cash management accounts because they're making a fee for getting deposits to underlying banks hungry for them). But that doesn't seem to be the case. Which is unfortunate, because it should be not too difficult to offer a checking account with check access, ATM access, unlimited transactions, P2P payments, mobile deposits, and interest bearing (brokerages do it living off the float [1]). Sidenote: This focuses on personal accounts. Brex's Cash Management account seems to be a great biz banking option for those who qualify. No affiliation. Banking infra in the US sucks, which is why everyone has to be a bank. [1] https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...
    • thomaslangston 7y ago
      If you have 6 months expenses saved, you don't need same day access. You keep 1 month in an immediate access account and 5 in the high yield savings account.
      • toomuchtodo 7y ago
        I have had to come up with a dollar amount worth several months of expenses on very short notice (same day, life is unpredictable). YMMV, but there's no reason I shouldn't be able to get those funds within seconds (if I'm adequately authenticated). With a wire, I can get it same day (if executed by ~3pm eastern). I shouldn't need to pay for a wire, or talk to a human unless a fraud signal was detected. I'm not a hedge fund seeking tens of millions of dollars of liquidity of a cash equivalent in a moment. These dollar amounts are trivial (<$100k). Financial services users should be able to have access to and be able to move their funds through financial plumbing inexpensively and rapidly. Fix the plumbing, raise the bar with regulations on financial services providers to commodify the offerings.
        • cstoner 7y ago
          > I have had to come up with a dollar amount worth several months of expenses on very short notice (same day, life is unpredictable). That seems like a perfect use case for using a credit card to cover the expense and then pay yourself back when your money moves out of the savings account. I have trouble imagining a case outside of a hostage situation where you would need access to your emergency fund same day.
          • toomuchtodo 7y ago
            Two examples: Auto purchase where there was an issue with the banking partner of the vehicle manufacturer. Another is a real estate transaction. Bailing friends out of jail is always cheap (~$500), but not everyone takes credit cards (no chance for the first two scenarios). Fundamentally, I should not have to explain why I would desire immediate access to my own cash reserves at a moment's notice to excuse broken financial infrastructure.
  • shaklee3 7y ago
    I thought wealthfront and the like aren't exactly the same type of insurance. They don't put your money in a single account, and if you ever needed the insurance you have to go through a third party that made a deal with the actual banks.
    • acjohnson55 7y ago
      With Robinhood, I understand cash is SIPC insured once it hits their systems, and then it is a couple of days until it is deposited in underlying accounts at their program banks, where it is FDIC insured. So it's something to consider when moving large amounts of money. Another thing is that these neobanks have withdrawal amount limits and ATM limits, and so they aren't a great choice for storing emergency funds.
      • briandear 7y ago
        > Another thing is that these neobanks have withdrawal amount limits and ATM limits Every French bank has these limits. I once had a French bank account that limited my debit card to €2500 in purchases in a month — for no good reason other than trying to limit access to my own money. Cash purchases over €1000 are also illegal in France. For the most ridiculous banking rules and limits, France is the place. My chase account in the other hand, I could withdrawal $100k in cash if I wanted. Still have a (high) debit card limit, but I can call them and immediately get it lifted for a specific transaction (such as buying a car.)
        • acjohnson55 7y ago
          Yeah, but for the neobanks, it's even more strict. You simply can't access all your money instantly. As far as I can tell, anyhow.
• ProAm 7y ago
  > Another answer: because regular banks are awful to deal with. They don't have nice APIs to just move money around. They apply velocity limits at surprising times. They can terminate your account suddenly for opaque reasons. Do you think Google is going to do any better at this? They already have no customer support, close accounts without notice....etc... The article is right, this is about engagement.
  • mjevans 7y ago
    It seems like they're making the point that this will be better for Google and for things like Google Pay/Wallet which can now operate at a bank level rather than at a customer of a bank level. For the rest of us, I agree with your view.
  • superfrank 7y ago
    > Do you think Google is going to do any better at this? Google's new checking account isn't really Google. They don't currently have the licenses needed to act as a bank. It's basically a Google branded checking account from Stanford Federal Credit Union. From what I've read, Google's checking account will be similar to Uber's credit card in that you will sign up and get some benefits through Google/Uber, but pretty much all maintenance will be handled by the issuing bank. Source: https://www.fool.com/investing/2019/11/17/why-is-google-about-to-launch-checking-account-for.aspx https://www.fool.com/investing/2019/11/17/why-is-google-abou...
    • MetalGuru 7y ago
      And this is intentional. Google definitely doesn’t want to be regulated as a bank. It just wants your financial data, so it can send better targeted ads.
      • thepangolino 7y ago
        Isn’t access to that financial data extremely well regulated? I’ve often thought of launching a credit card company solely for access to people’s transaction data. That provides tremendous insight into many companies turnovers allowing to anticipate earnings.
• deleted 7y ago
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• __MatrixMan__ 7y ago
  This 100%. I work at a fintech that's not a bank. Instead, we integrate with people who integrate with banks--we've basically got one middleman per continent (except a few). It's awful. Rather than having to figure out the regulatory details of each jurisdiction so that we can be compliant, we instead have to figure out the regulatory details of each jurisdiction so that we can trick whichever middleman into being compliant on our behalf. The waste is incredible. It's all promises of "we'll handle that" but never any actual contact with somebody who can code and you know... handle it. I'm beginning to think it's just parasites all the way down. And if that's how it's gonna be, why not cut out the middlemen and be the only parasite in the loop?
  • AchieveLife 7y ago
    Because that's how the cycle continues and the status quo remains the same. It once started out with someone asking the exact same question and evolved into this.
  • kjs3 7y ago
    Exactly. I talk to several Fintech startups a month complaining about this sort of thing. Forgive me if I can't quite gin up any sympathy. It's a business with centuries of baggage, massive inertia, vast resources, but what I typically hear is "I'm gonna Uber/Tesla/Bird this financial industry thing in 6/12/18/24 months, ignore the rules because 'disruption' and find someone else to push all the risk, compliance and governance issues off onto. I'm going to pretend it's not a cost of doing business and hope no one catches on before we find an exit and get rich". And now you're finding those 'others' aren't the suckers you wanted them to be, and that complying with regulations, especially across the world, actually costs money. Tons of it. And most of all...real disruption is incredibly hard, no matter the SV mythmaking. The Fintechs that are going to be unicorns aren't complaining that the people they tried to outsource the hard parts of the business to aren't making all the hard problems magically disappear.
    • CaptainZapp 7y ago
      Thank you. Finally a succinct, true statement regarding financial regulation. I work in finanance and a huge chunk of my work is generating reports for regulators. Specifically in derivatives (swaps and such), which was fairly wild west before the financial crisis. There's a lot of catching up and a lot of interest into the trades by regulators, which were basically off-exchange and which are a big part of structured products. Those are financial products, which Warren Buffet deigned "Financial Products of Mass Destruction" And you know what? I agree with those regulations despite the fact that it can be a real pain. And if anybody really believes such regulation is crap and just there to support entrenched market players. Well; essentially banks self regulated before the financial crisis. And what could ever go wrong with that?
• ChrisSD 7y ago
  Is that American banking? In the UK I can't say I've ever experienced such issues. I do bank to bank transfers fairly frequently.
  • nostrademons 7y ago
    Yes, the American banking system is just ridiculously bad. I remember studying abroad in New Zealand (in 2004!) and marveling at how EFTPOS was universal, everything was chip & pin, and funds transfers could easily be done online (and often clear the same day!). The cashiers would look at me strangely with my American credit card, and they would always check the signature. (Which, it may astound foreigners to learn, most American cashiers do not. How do we prevent credit card fraud? We don't, in general. Fraud losses over $50 are reimbursed by the credit card company, if you report them, which makes it up out of exorbitant interest rates that they charge people dumb enough to carry a balance.) The U.S. finally got some of the security measures the rest of the world has (chip & PIN, for example) around 2017, and in many regards is still behind. America has the downsides of being the first-mover and of being dominant. A lot of our system was built before modern computerization and then retrofitted for the bank's convenience (not the customer's), and because the U.S. economy & military is so dominant, the rest of the world has to deal with the U.S. financial system as it exists now. That means that there's very little pressure on existing U.S. retail financial institutions to improve, and a lot of regulations and institutional inertia keeping out new entrants. It's much the same situation with Internet access (where our consumer Internet speeds are often 2 orders of magnitude slower than in much of the rest of the world) and in health care (where we spend the most but have one of the worst life expectancies of developed nations).
    • henrikschroder 7y ago
      I think the biggest tragedy is that most American consumers have no idea how bad American banks are compared to banks in other countries. Moving to the US is like stepping back into the 70's, and then discovering that everyone around you think that everything is fine, their banks are fine, that US banks are somehow modern and cool. Anecdote: I wired some money from my Chase bank account to my Swedish bank account, in USD. I made the transfer through the internet bank, but since it was "after hours" New York time, it was scheduled to transfer the next morning. Early next morning I checked my Swedish bank account, they had received the money, exchanged it to SEK at a decent rate, and the money was immediately available for me to spend there. A couple of hours later I receive an email from Chase, where they're telling me that they've now sent the money, and that I should expect to see the money in my Swedish bank account about three days later. American banks suck.
• amelius 7y ago
  > They can terminate your account suddenly for opaque reasons. Isn't one of the requirements for being a "bank" that you can't do stuff like that?
  • astura 7y ago
    No, not at all, banks do that too. https://money.cnn.com/2014/05/07/pf/bank-account-closing/ https://money.cnn.com/2014/05/07/pf/bank-account-closing/ I once had a bank account closed for "suspicious behavior." The suspicious behavior was making too many transfers to one of my other bank accounts. If you open a new bank account and deposit a lot of money, say over $10,000, then they almost certainly will freeze your account and you'll have to call up to unfreeze it. Sometimes you even have to go to a branch to unfreeze it. Chase, specifically, is really bad when you're trying to transfer to/from new accounts https://www.doctorofcredit.com/psa-dont-use-ach-pull-for-chase-bank-account-openings-avoid-account-lockup/ https://www.doctorofcredit.com/psa-dont-use-ach-pull-for-cha... I open (and close) a lot of bank accounts to collect those signup bonuses. If you read forums dedicated to this then you hear stories of people getting their bank accounts terminated suddenly for opaque reasons all the time.
    • hash872 7y ago
      > If you open a new bank account and deposit a lot of money, say over $10,000, then they almost certainly will freeze your account I have done this multiple times with zero issues whatsoever. With larger sums than $10k, and with global-sized banks. Sorry to hear about your issues but you're over-extrapolating. > I open (and close) a lot of bank accounts to collect those signup bonuses This, I think, may be your issue. For one thing, as the recent NYT piece on customer scores shows, these companies do exchange information on their customers- you may come up flagged or even blacklisted specifically because of this
  • jonas21 7y ago
    On the contrary, doing this is practically a requirement for being a bank. US law requires banks to file a suspicious activity report if they see unusual activity in your account that may be associated with money laundering or criminal activity. What qualifies as suspicious activity is not well-defined, but can be as simple as large unexpected transfers into or out of the account. The law also requires banks not to tell you about it. They don't necessarily have to close your account, but most will, especially after several reports, because of the risk of failing to comply in the future. And since they're not allowed to tell you why they closed the account, you end up with opaque reasons.
• callmeed 7y ago
  Don't agree and I love Chase bank. I have multiple Chase accounts and transfers between them are instant. Transfers to/from external places like my TDA brokerage account, Venmo, etc. are there the next day. They also have Zelle/QuickPay (though I don't use it). My paycheck is direct deposited the day its supposed to be or earlier. I've had my debit card skimmed at gas stations twice and my wife has been defrauded by shady online merchants a couple times. Chase always handles it well and reverses the charges. I have Private Client status which (granted requires a certain level of deposits) gets you a real human on the phone instantly. I couldn't imagine getting that from Google or Robinhood.
  • okareaman 7y ago
    2nd that on Chase. I'm very happy.
  • rco8786 7y ago
    What you’ve just described is 100% table stakes for a bank account. Literally every major provider does all that.
• ci5er 7y ago
  > They can terminate your account suddenly for opaque reasons. I generally am 'ok' with modern (US) banks and global, partly because I know their rules and set my expectations accordingly, but unlike what one of the sub-commenters said: "Chase" completely fucked up my world with no recompense for a while. No rhyme. No reason. Ultimately it was because I had connections to executives of the bank at the CEO level that I was able to get it sorted out, but until then, I was literally "without any money" for about 60 days. That, to put it mildly, if you don't have a reason or a recovery time-line (hard to tell your friends: trust me - I'll pay you in 15 days) if you literally don't know. EDIT: It was /u/callmeed below. I can't say 'no' to his/her experience - but while I still work with Chase - I feel "on edge" all the time because I never know what they are going to do to me without notice.
  • rco8786 7y ago
    Same thing happened to my wife earlier this year. She deposited a check (from an insurance company), Chase apparently deemed it fraudulent (it was not) and with absolutely zero notice simply closed her account. She pulled open the app one day and noticed that the account was just missing, with all the money that was in it. Hours on the phone with no resolution. They told us we had to get the insurance company to contact them and verify that the check was valid. Like wtf is that. That’s not how checks work. And we’re not talking about a large sum of money. I think it was around $4k. Not particularly abnormal. We finally walked into a branch with our 4 month old daughter, plopped ourselves in the manager’s office and told him we weren’t leaving until it was resolved. A few hours later we were told that the account was permanently closed and could not be reopened. But that we would receive a check in the mail for the funds that they quite literally stole from us. As soon as that check cleared we closed all our accounts with Chase. Fuck them.
    • perl4ever 7y ago
      Sure, don't do business with Chase. But this points to why people use banks, you take for granted that your money won't disappear permanently with no recourse. So you go ballistic when it seems like it might happen. Nobody in their right mind wants to use anything where it really does happen. If Google had money that belonged to me, I have no idea where to even begin trying to get it back. Do they have offices that you can stage a sit-in in?
• beatgammit 7y ago
  I wanted to build a product based on moving money around, and it seemed like it would be easier to start my own than to get what I wanted at a reasonable price. The financial industry is needlessly complicated and I don't know why it's so hard to just move money around. I can write checks easily and even manually set up recurring ACH transfers, so why can't I automate that with an API? There are a couple companies that do it, but it's too expensive for doing lots of small transactions, yet it's free through ACH and writing checks...
  • judge2020 7y ago
    > The financial industry is needlessly complicated and I don't know why it's so hard to just move money around. I guess regulation and the technology being fairly hard to iterate on since a lot of systems are running the same software as they were 20-30 years ago when everything was moved over.
  • salawat 7y ago
    The financial industry is difficult because of money laundering. Any illegal activity requires a financial crime at some point to launder the spoils. Therefore, financial institutions are the perfect place for law enforcement to hook into to try to crack down on the more widespread and organized forms of crime. The financial system is so much of a force multiplier for criminal activity that LE can't really ignore it. To hook in, they need you to do KYC, they need you to check with OFAC, they need you to do you to do SAR's and report any attempts to structure financial activity. Basically, actors in the financial services industry, as a prereq to being able to do so, have to agree to act as a modern day Stasi. Thank the criminals and reactionary Congressfolk of the last fifty or so years.
  • qaq 7y ago
    If you think it is easy to charter a bank you are in for a huge surprise. Credit Union might be an option though.
  • xivzgrev 7y ago
    ACH / writing checks is free through your bank because if it wasn't, you'd bank somewhere else. But there's 0 incentive to give you API access, your usage could skyrocket and it wouldn't be profitable anymore.
• BjoernKW 7y ago
  I absolutely agree. Back in 2016 I wrote a blog post about accounting being still a strangely manual process: https://bjoernkw.com/2016/04/03/accounting-in-2016/ https://bjoernkw.com/2016/04/03/accounting-in-2016/ Ultimately, I came to the conclusion that in order to solve these problems I would have to start my own bank. Unfortunately, not much has changed since then. At least I now use this useful tool for converting CSV exports of my account statements to MT940 files: https://github.com/msc01/soacsv2mt940 https://github.com/msc01/soacsv2mt940 It’s still a semi-automatic and somewhat error-prone process, though.
• vanniv 7y ago
  Honestly, I wouldn't trust Google (or any other tech giant) to be my bank. My bank doesn't have a history of locking people's accounts when they post "the wrong" political opinions online. My bank doesn't have a plan to monetize access to my account, or to limit use of the account to only those activities of which the bank's army of woke employees approve. I think I'll stick with a real bank, thanks.
  • girvo 7y ago
    While I agree with your caution regarding Google, banks do indeed lock or close accounts for entirely opaque reasons, too, with little to no recourse!
  • sroussey 7y ago
    Oh, so not true. Banks often close accounts of types of people or businesses they don’t like at the moment. Just ask a PE/VC with a BofA account!
    • perl4ever 7y ago
      I think people willfully conflate accounts being closed with your money actually disappearing.
    • vanniv 7y ago
      That, though, is mostly about risk management -- and even if they close your account, you get the money back. (I also would never do business with Bank of America, because they're awful and they hate their customers even more than Wells does) But even BofA doesn't do things like read your Twitter posts and YouTube comments so they can blackhole your account if you have have the wrong politics. The tech giants, on the other hand, will seize your stuff in a heartbeat if you step out of Silicon Valley's definition of acceptable beliefs and opinions. My credit card works at any merchant -- and the fees are the same. I don't get hit with a temporary ban if I buy a Chick-fil-A sandwich, for example.
      • solveit 7y ago
• adrr 7y ago
  If someone sent you money via an ACH push, they shouldn't hold money for 90 days. If you have pulled the money in via ACH pull. The bank you have pulled from has 90 days to contest that money transfer. Fintech banks will also do holds and have low amount thresholds to mitigate risk. One of the large fintech banks actively advertises $1 million in FDIC insurance but you can only move $50k a day with no way to remove the fraud controls for your account. Also none of these fintechs are actually banks. They just partnered with a small bank(s) and are still beholden to these banks compliance team. There are strict rules about monitoring bank transfers and reporting suspicious transfers. If your funneling cash through your fintech bank, you'll probably get shutdown with no explanation.
• Animats 7y ago
  Paypal is generally considered to be worse than banks. They will "freeze" your funds for months. You have very weak rights there. With real banks, if that happens, you raise hell with the bank regulators and something happens.
  • nradov 7y ago
    PayPal is actually a bank in some countries.
• mcv 7y ago
  I have absolutely no interest in using any of these online start-up banks, but Dutch banks tend to be pretty decent. They're well regulated and try to be aware of their social responsibility. Most of the banks I've worked for appear to the taking this fairly seriously, and try to run their software departments as real tech companies. They try to make accessing your money as easy, convenient and cheap as possible without compromising security. They're by no means perfect, but they're a lot better than most American banks sound.
• cm2187 7y ago
  To their defence you should see the eye watering piles of regulations they have to comply with. A large international bank will typically have a whole team dedicated to just reading all the draft and final regulations that are coming every week. Regulators state that they want more competition but in reality they don’t. Those regulations create massive barriers to entry. And regulators are wary about smaller players who will not have the scale to be financially robust, will be more likely to be a dodgy operation, and not to have all the established procedures of a large player.
• odiroot 7y ago
  > They can terminate your account suddenly for opaque reasons. This happens more often with "bank" startups than with old, boring, regular ones.
• throwaway122378 7y ago
  Nice APIs = bitcoin