22 ms·

Visa, Plaid, networks, and jobs

178 points by i_am_not_elon 7y ago

cushychicken 7y ago
“He had three girls working on Burroughs bookkeeping machines, each handling 1,000 to 1,500 accounts. I looked at the size of the accounts: $4.58. $12.82. And he was sending out monthly bills on these accounts. Then the customers paid him maybe three or four months later. Think of what this man was spending on postage, labor, envelopes, stationery! His accounts receivables were dragging him under.” I never got why credit cards were such a big deal for merchants, until reading this. I never got why credit cards were such a big deal for consumers, until I heard this: https://www.npr.org/2019/06/26/736352315/episode-922-the-cost-of-getting-your-money-back https://www.npr.org/2019/06/26/736352315/episode-922-the-cos... What a week of learning about credit cards it has been!
- MBCook 7y ago
  Isn’t it crazy to think that so many stores used to run their own credit books and have to do all that accounting and servicing by themselves? Every pharmacy, hardware store, grocery store... anywhere that wanted to accept credit had to do it all.
  - derefr 7y ago
    What was the reason to “accept credit” in the first place, in an era when anyone with stable employment could have applied for a line of credit (i.e. a personal long-term loan) from their local bank, such that they could then pay these services with cash? I can understand credit as a natural extension of “running a tab” at a hotel or restaurant—you order now, and settle your account later, for various definitions of “later.” But why would a retailer be interested in offering private/internal credit that they had to manage and settle? Sounds negative-ROI to me.
    - vonmoltke 7y ago
      Well, for one it reduces friction, which increases the likelihood of making a sale. If a customer comes in to a store, but has to leave to go to their bank, there is a chance they won't return to make the purchase. Even if it is something they need, a competitor might lure them in between the point they get money from their bank and they get back to your store. The value, of course, depends on how many additional sales the reduced friction generates, versus the cost of maintaining credit books.
    - lucozade 7y ago
      In most cases they were just running a tab. Unless you make the customer pay a deposit up front, any gap between the purchase and the invoice being paid is an extension of credit.
    - ceejayoz 7y ago
      It's for scenarios like "I'd like to buy those $40 steaks, but I've only got $30 with me."
    - phire 7y ago
      So people didn't have to carry cash around. People would set up accounts at their local stores so all their common daily and weekly errands could be done without cash. Then once a month (after payday) they would take cash around to all the local stores paying their accounts. (Or write a check, I guess) Stores supported this because it was a form of lock-in, and because it reduced friction. Faster than exchanging cash too, or writing a check. When working correctly (the customer comes in and pays without prompting) it's super low effort. Especially for stores with only one location and checkout counter. Only really costs time and money when a customer requires chasing up.
    - scott_s 7y ago
      Because it is the norm. You're probably coming from the opposite frame, that requiring cash up front for all transactions was the norm. It wasn't. We've been extending credit and taking on debts for millennia. It's just how money works.
      - 7y ago
- pavlov 7y ago
  I was born in 1980, and do remember our family having a credit account at the local grocery store. This was in Helsinki, Finland. I think our account number was 14? Simple enough for a child to remember. Around age 9 I was using the account on my own to buy food after school. I'd state the account number, and the cashier would write the credit down with a pen into a special notepad they kept under the cash register.
  - csunbird 7y ago
    We also had a similar system in Turkey too, with local grocery shops. The owner would have two notebooks per customer, one would stay at the store and one would be given to customer. Whenever you needed to buy something but you wanted to pay later, the merchant would put the transaction on his notebook with a copy on your notebook, so at the end of the month you would simply bring your notebook and cross reference the transactions and pay your debt.
    - Semaphor 7y ago
      Maybe it’s a Turkish thing? Because the owner of the copy shop I mentioned [0] is a Turkish immigrant ;) [0]: https://news.ycombinator.com/item?id=22047151 https://news.ycombinator.com/item?id=22047151
      - csunbird 7y ago
        It definitely could be!
    - imedadel 7y ago
      This is still very common in Tunisia too
  - Semaphor 7y ago
    I’m having something like this for a copy-shop in a pop 200k city. In 2020. Not an account number, and essentially a manual debit account. The owner has a book with balances of people who pre-paid, when you print something, he looks you up in his book, edits in the new balance and then edits the balance on a piece of paper I have :)
- throwaway55554 7y ago
  Good grief! Why didn't she send a $1 first to make sure she had the right person!?
  - adambard 7y ago
    Why do people make mistakes at all? Everything would be much easier if people would just be less fallable.
    - throwaway55554 7y ago
      Anyone who's ever set up direct deposit knows how this works. It's almost common sense.
      - kelnos 7y ago
        I imagine most people have not done that (I've mostly seen that when linking accounts like brokerage accounts online), and I don't think it's common sense. For setting up direct deposit at most workplaces (in the US, at least), you just give HR your bank routing and account numbers when you start and that's it. I've never gone through any kind of verification process.
  - cushychicken 7y ago
    I don't know, but I know I've never thought of that. Pocketing this technique for future use!
- kelnos 7y ago
  > I never got why credit cards were such a big deal for consumers... For me, it's always been about that buffer between my actual money and the merchant. Sure, credit card rewards programs have been great, but having a middleman who is more or less on my side in all financial transactions is a game changer. If I use my debit card, the money is out of my possession; it's possible to get it back, but it's not certain, and while I'm waiting for that to happen, I don't have access to that money. (And if I use cash, I pretty much just have to accept that the money is gone the second it leaves my hands.) If I use a credit card, I still have the money, and can dispute the charge. Even if I don't notice the problem until after I pay my credit card bill, I still have a single entity (who, again, is more or less on my side) who will refund my money if I have a valid complaint, even if the merchant isn't playing ball or is a fraudster.
  - xur17 7y ago
    My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If there was a way to pay (not cash) that removed this fee, and let me keep the savings, I'd do it for most transactions, even if it removed my ability to charge back transactions.
    - chipotle_coyote 7y ago
      My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. If you carry a balance, you're paying on that, sure, but nothing requires you to do so. (Also, of course, you might be actually getting 1% or more back on credit card transactions, if they have cash back programs.)
      - xur17 7y ago
        > If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. The merchant is paying extra, and that cost is hidden in the price I pay.
- isoskeles 7y ago
  When I first read this several hours ago, I was surprised and in agreement with the conclusion of that quote, that this would "drag down" the business. As those numbers seem very low for the costs associated with getting payment. But it should be pointed out that those numbers are in the context of a quote from ~1958. Back then, postage was $0.04. Also, $4.58 and $12.82 (as examples) would be worth $40.52 and $113.41 today. So I'm not actually sure if a 6% charge on sales would be worth it here. I don't know what the cost of labor would have been back then (assume minimum wage in that area in 1958 maybe). Anyway, the point is the numbers don't seem as alarming and obvious to me after looking up postage and inflation at the time.
igammarays 7y ago
Huh. And all this time, as a person who uses credit cards heavily, but never paid a penny on interest for years, but used all my card benefits, I thought I was cheating the banks. This is the first time I learned that they make money on each transaction regardless of interest or late payment fees. That’s a revelation.
- yash1th 7y ago
  They do. some places in United states and India you have to do a minimum amount of purchase for them to accept any kind of card
  - derefr 7y ago
    IIRC Visa (at least) has a rule stating that a business can’t charge more for Visa card transactions than cash transactions, nor can they have a minimum purchase for Visa card transactions (unless they also have the same minimum purchase for cash transactions.) If they find out a business is doing these things, they’ll stop allowing the business to accept Visa (even through intermediaries like payment processors).
    - kyllo 7y ago
      It may be against Visa's ToS, but it's still a very common practice, especially among small businesses, probably because of enforcement challenges.
      - exclusiv 7y ago
        I've reported a few businesses and it was an easy process. I don't think it's an enforcement issue; more of consumers not being informed that the merchants shouldn't be forcing them to increase their basket size to a min amount and not knowing that it's easy to report.
    - intelekshual 7y ago
      This is no longer true as of ~2013. See rules on surcharging: https://usa.visa.com/dam/VCOM/global/support-legal/documents/merchant-surcharging-qa-for-web.pdf https://usa.visa.com/dam/VCOM/global/support-legal/documents... And minimum transaction amounts (minimum can't exceed $10): https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf https://usa.visa.com/dam/VCOM/download/merchants/minimum-tra...
guelo 7y ago
> that same Treasury report highlighted the fact that the United Kingdom and European Union have initiatives requiring API access to bank accounts, but recommended a private solution. This is the Trump government failing us and gifting the next generation's financing needs to the next generation of rent-seekers.
- DataGata 7y ago
  Definitely not a "Trump" problem. Obama wouldn't have started it either. There is no stomach on either part of the parties to upset the banks.
  - guelo 7y ago
    Yes, Obama failed us and now Trump is failing us.
    - fatbob 7y ago
      On the other hand, this kind of bank regulation issue seems right in Warren's wheelhouse and the president might have the power to make this happen through their existing bank regulation powers, or maybe through the CFPB...
- RickS 7y ago
  I have a mixed position on this. Considered in isolation, the UK's API regulations are a spectacular boon for customers. Considered in the context of the rest of the UK's regulatory environment (porn filters, etc), it seems plausible that the UK gov's push for bank APIs is less about being kind to their citizens and more about undermining cash and pushing all financial activity onto infrastructure that's easily accessible to a surveillance state. I'd like to have tech like this in America, but I don't think we have the spine on any front. We aren't willing to hardball businesses on timeline/featureset (for example: the partial and late rollout of chip/pin in the US), and we aren't willing to write legislation that protects citizens from abuse and creates punitive structures that make abuse of citizen data by companies an economically irrational act. In light of that, I wonder if shitty APIs are the lesser of two evils.
rahimnathwani 7y ago
"At first glance, open banking might seem to be a problem for Plaid, but ... developers will still prefer to use one well-built API that abstracts away thousands of financial institutions" This type of centralisation makes me sad, but it's probably true for most startups. By using Plaid or an Open Banking service from another party (e.g. Experian) you'll pay fees to get information you can get for free if you integrate directly with the banks. Even though the open banking APIs are uniform, any company wishing to use them still has to register with each and every bank, and test the integration works with each one. Until you've done it once, it's hard to know whether it will be easy (you write the code once, and it works flawlessly for all banks) or you have edge cases (e.g. some banks have funny timeout issues). So if you're a developer on a deadline, you will likely prefer to use a single API.
- imglorp 7y ago
  Banking dinosaurs brought this pressure for middle services on themselves by pretending they're not interchangeable services with limited means to tell them apart otherwise. If they'd all support a standard API, plaid would vaporize overnight.
  - rahimnathwani 7y ago
    "If they'd all support a standard API, plaid would vaporize overnight." In the UK, the banks already support a standard API, but it's still easier for developers to use an intermediary to access those APIs. Because using Plaid or Experian they don't need per-bank credentials and tests.
    - salawat 7y ago
      >Because using Plaid or Experian they don't need per-bank credentials and tests. They also push all the risk in terms of Plaid being compromised onto the User's, instead of the service provider. This is a winning deal for Plaid, because in the event of an undiscovered breach, there is no proof in the form of say, hackers running off with Plaid's hypothetical Autonomous System's credentials and generating fraudulent activity that can be shut down by just patching the breach and changing Plaid's credentials. Instead, banks have to scratch their heads and figure out why all these seemingly random customers are calling about fraudulent activity at right around the same time. It's absolutely terrible in the diagnostics department, but seemingly ideal for exploiting legal grey areas for avoiding culpability if something goes wrong. I'm not sure federated OAuth is the answer, but it's a damn sight better than what Plaid is doing.
te_chris 7y ago
They have competitors though, Yodlee and Salt Edge to name but two. Have had some 'fun' recently in the UK when the FCA introduced open banking without actually allowing foreign companies any way to particiapte. This broke the budgeting app that I use (Pocketsmith https://www.pocketsmith.com https://www.pocketsmith.com) because Yodlee, the bank feed provider they used, isn't a UK company and neither are they, thus they didn't comply with the regulations. Pocketsmith got around this by adding feeds from Salt Edge, thankfully. I've actually become quite dependent on having proper cashflow, balance sheet and P + L statements for my personal finances.
- snowAbstraction 7y ago
  There is the Swedish company Tink in this space too. https://tink.com/ https://tink.com/
jka 7y ago
The narrative here is internally consistent but there are a few pieces that I don't quite understand when it meets reality: * It's suggested is that Visa will 'fix' the security concerns that Plaid introduces (the use of username & password collection), but it seems unclear how Visa would be able to change the fundamentals of the Plaid<->bank interactions? * It's also theorized that European banks will prefer to use Plaid rather than a privately recommended solution (not referenced in the article) to achieve EU open banking compliance. Do Plaid have strong relationships with EU banks at present, and would it not be more likely that Plaid would implement against the existing EU open banking APIs (single implementation, no lobbying) than that Plaid would implement their own alternative (requiring per-institution implementation, and also lobbying to ensure their approach is accepted both by banks and EU regulators)?
- MBCook 7y ago
  On #1 I assume it’s simply the fact that Visa is big enough and stable/reliable enough that banks would be willing to do the integration to them to get the benefits instead of doing hundreds of bespoke integrations for little apps/services.
  - jka 7y ago
    The trusted, widespread brand angle does make sense there as a reason for banks to choose to integrate with Visa, agreed. But does that then imply that users authenticate with their bank via Visa (i.e. Visa becoming an identity provider -- not totally unimaginable given their association with customer-issued cards)? Or instead that banks would implicitly offer this data to Plaid/Visa under their card issuance ToS, without user authentication required? (I'm not really asking for answers, I don't think we can really know at this point. It just leads to questions like this and I'm curious)
    - judge2020 7y ago
      User authentication would be handled somewhere :) But ya, I bet they're going to push hard on "provide us openid connect" in future contract negotiations to solve the security problem.
psoots 7y ago
And then it all falls apart when Plaid gets hacked and millions of people's _actual bank account usernames and password_ get stolen. That is not a safe premise to start a business (or to acquire one).
- milofeynman 7y ago
  And because most companies that use plaid don't even show the Plaid logo, you don't know who is directly integrated with a bank and who is using Plaid
  - annexrichmond 7y ago
    Some companies[1] indicate their Plaid dependency in their Privacy Policy, just like it is common to do when they use Google Analytics. But yeah, it's unfortunately not a standard. [1] https://zerodown.com/privacy https://zerodown.com/privacy
cowpig 7y ago
Ben Thompson talks a lot about networks and platforms in his blog, and it's always from the perspective of the capitalist: here's a great way to capture value and make a profit. When he does consider the perspective of the user or consumer, it's still indirectly from the perspective of the capitalist: users/consumers will behave in X way, get Y value, etc, which is why [megacorp] should do Z. I'd really like to see him take a broader view. Could he imagine a set of rules/regulations that would result in a better outcome for the public? I've long been thinking about this problem: - we all much prefer a single platform/network - but if there's a single platform/network, then there aren't good market incentives on the side of the provider This seems like such a fundamental problem in a space he writes so much about. Ben Thompson, please think and write about this!
- fatbob 7y ago
  Right! Banks are already regulated by the government and this seems like an opportunity for them to improve the retail banking market by requiring interoperation. Maybe it wouldn't work but it would be interesting to hear from him on this topic - can the government make this market work better?
gigatexal 7y ago
I recall a podcast a Plaid tech person did for Software Engineering Daily where it was alluded that Plaid had moved away from using screen scraping to something much better — it sounded like they had paid for connections to the bigger banks — perhaps a one off API access only for Plaid or were leveraging some other way to get around the problematic screen scraping approach.
szhu 7y ago
I had no idea how recently modern credit cards were invented until reading that first paragraph. Wild. https://en.m.wikipedia.org/wiki/Visa_Inc https://en.m.wikipedia.org/wiki/Visa_Inc.

178 points by i_am_not_elon 7y ago

“He had three girls working on Burroughs bookkeeping machines, each handling 1,000 to 1,500 accounts. I looked at the size of the accounts: $4.58. $12.82. And he was sending out monthly bills on these accounts. Then the customers paid him maybe three or four months later. Think of what this man was spending on postage, labor, envelopes, stationery! His accounts receivables were dragging him under.” I never got why credit cards were such a big deal for merchants, until reading this. I never got why credit cards were such a big deal for consumers, until I heard this: https://www.npr.org/2019/06/26/736352315/episode-922-the-cost-of-getting-your-money-back https://www.npr.org/2019/06/26/736352315/episode-922-the-cos... What a week of learning about credit cards it has been!

MBCook 7y ago
Isn’t it crazy to think that so many stores used to run their own credit books and have to do all that accounting and servicing by themselves? Every pharmacy, hardware store, grocery store... anywhere that wanted to accept credit had to do it all.
- derefr 7y ago
  What was the reason to “accept credit” in the first place, in an era when anyone with stable employment could have applied for a line of credit (i.e. a personal long-term loan) from their local bank, such that they could then pay these services with cash? I can understand credit as a natural extension of “running a tab” at a hotel or restaurant—you order now, and settle your account later, for various definitions of “later.” But why would a retailer be interested in offering private/internal credit that they had to manage and settle? Sounds negative-ROI to me.
  - vonmoltke 7y ago
    Well, for one it reduces friction, which increases the likelihood of making a sale. If a customer comes in to a store, but has to leave to go to their bank, there is a chance they won't return to make the purchase. Even if it is something they need, a competitor might lure them in between the point they get money from their bank and they get back to your store. The value, of course, depends on how many additional sales the reduced friction generates, versus the cost of maintaining credit books.
  - lucozade 7y ago
    In most cases they were just running a tab. Unless you make the customer pay a deposit up front, any gap between the purchase and the invoice being paid is an extension of credit.
  - ceejayoz 7y ago
    It's for scenarios like "I'd like to buy those $40 steaks, but I've only got $30 with me."
  - phire 7y ago
    So people didn't have to carry cash around. People would set up accounts at their local stores so all their common daily and weekly errands could be done without cash. Then once a month (after payday) they would take cash around to all the local stores paying their accounts. (Or write a check, I guess) Stores supported this because it was a form of lock-in, and because it reduced friction. Faster than exchanging cash too, or writing a check. When working correctly (the customer comes in and pays without prompting) it's super low effort. Especially for stores with only one location and checkout counter. Only really costs time and money when a customer requires chasing up.
  - scott_s 7y ago
    Because it is the norm. You're probably coming from the opposite frame, that requiring cash up front for all transactions was the norm. It wasn't. We've been extending credit and taking on debts for millennia. It's just how money works.
    - 7y ago
pavlov 7y ago
I was born in 1980, and do remember our family having a credit account at the local grocery store. This was in Helsinki, Finland. I think our account number was 14? Simple enough for a child to remember. Around age 9 I was using the account on my own to buy food after school. I'd state the account number, and the cashier would write the credit down with a pen into a special notepad they kept under the cash register.
- csunbird 7y ago
  We also had a similar system in Turkey too, with local grocery shops. The owner would have two notebooks per customer, one would stay at the store and one would be given to customer. Whenever you needed to buy something but you wanted to pay later, the merchant would put the transaction on his notebook with a copy on your notebook, so at the end of the month you would simply bring your notebook and cross reference the transactions and pay your debt.
  - Semaphor 7y ago
    Maybe it’s a Turkish thing? Because the owner of the copy shop I mentioned [0] is a Turkish immigrant ;) [0]: https://news.ycombinator.com/item?id=22047151 https://news.ycombinator.com/item?id=22047151
    - csunbird 7y ago
      It definitely could be!
  - imedadel 7y ago
    This is still very common in Tunisia too
- Semaphor 7y ago
  I’m having something like this for a copy-shop in a pop 200k city. In 2020. Not an account number, and essentially a manual debit account. The owner has a book with balances of people who pre-paid, when you print something, he looks you up in his book, edits in the new balance and then edits the balance on a piece of paper I have :)
throwaway55554 7y ago
Good grief! Why didn't she send a $1 first to make sure she had the right person!?
- adambard 7y ago
  Why do people make mistakes at all? Everything would be much easier if people would just be less fallable.
  - throwaway55554 7y ago
    Anyone who's ever set up direct deposit knows how this works. It's almost common sense.
    - kelnos 7y ago
      I imagine most people have not done that (I've mostly seen that when linking accounts like brokerage accounts online), and I don't think it's common sense. For setting up direct deposit at most workplaces (in the US, at least), you just give HR your bank routing and account numbers when you start and that's it. I've never gone through any kind of verification process.
- cushychicken 7y ago
  I don't know, but I know I've never thought of that. Pocketing this technique for future use!
kelnos 7y ago
> I never got why credit cards were such a big deal for consumers... For me, it's always been about that buffer between my actual money and the merchant. Sure, credit card rewards programs have been great, but having a middleman who is more or less on my side in all financial transactions is a game changer. If I use my debit card, the money is out of my possession; it's possible to get it back, but it's not certain, and while I'm waiting for that to happen, I don't have access to that money. (And if I use cash, I pretty much just have to accept that the money is gone the second it leaves my hands.) If I use a credit card, I still have the money, and can dispute the charge. Even if I don't notice the problem until after I pay my credit card bill, I still have a single entity (who, again, is more or less on my side) who will refund my money if I have a valid complaint, even if the merchant isn't playing ball or is a fraudster.
- xur17 7y ago
  My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If there was a way to pay (not cash) that removed this fee, and let me keep the savings, I'd do it for most transactions, even if it removed my ability to charge back transactions.
  - chipotle_coyote 7y ago
    My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. If you carry a balance, you're paying on that, sure, but nothing requires you to do so. (Also, of course, you might be actually getting 1% or more back on credit card transactions, if they have cash back programs.)
    - xur17 7y ago
      > If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. The merchant is paying extra, and that cost is hidden in the price I pay.
isoskeles 7y ago
When I first read this several hours ago, I was surprised and in agreement with the conclusion of that quote, that this would "drag down" the business. As those numbers seem very low for the costs associated with getting payment. But it should be pointed out that those numbers are in the context of a quote from ~1958. Back then, postage was $0.04. Also, $4.58 and $12.82 (as examples) would be worth $40.52 and $113.41 today. So I'm not actually sure if a 6% charge on sales would be worth it here. I don't know what the cost of labor would have been back then (assume minimum wage in that area in 1958 maybe). Anyway, the point is the numbers don't seem as alarming and obvious to me after looking up postage and inflation at the time.

igammarays 7y ago

Huh. And all this time, as a person who uses credit cards heavily, but never paid a penny on interest for years, but used all my card benefits, I thought I was cheating the banks. This is the first time I learned that they make money on each transaction regardless of interest or late payment fees. That’s a revelation.

yash1th 7y ago
They do. some places in United states and India you have to do a minimum amount of purchase for them to accept any kind of card
- derefr 7y ago
  IIRC Visa (at least) has a rule stating that a business can’t charge more for Visa card transactions than cash transactions, nor can they have a minimum purchase for Visa card transactions (unless they also have the same minimum purchase for cash transactions.) If they find out a business is doing these things, they’ll stop allowing the business to accept Visa (even through intermediaries like payment processors).
  - kyllo 7y ago
    It may be against Visa's ToS, but it's still a very common practice, especially among small businesses, probably because of enforcement challenges.
    - exclusiv 7y ago
      I've reported a few businesses and it was an easy process. I don't think it's an enforcement issue; more of consumers not being informed that the merchants shouldn't be forcing them to increase their basket size to a min amount and not knowing that it's easy to report.
  - intelekshual 7y ago
    This is no longer true as of ~2013. See rules on surcharging: https://usa.visa.com/dam/VCOM/global/support-legal/documents/merchant-surcharging-qa-for-web.pdf https://usa.visa.com/dam/VCOM/global/support-legal/documents... And minimum transaction amounts (minimum can't exceed $10): https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf https://usa.visa.com/dam/VCOM/download/merchants/minimum-tra...

guelo 7y ago

> that same Treasury report highlighted the fact that the United Kingdom and European Union have initiatives requiring API access to bank accounts, but recommended a private solution. This is the Trump government failing us and gifting the next generation's financing needs to the next generation of rent-seekers.

DataGata 7y ago
Definitely not a "Trump" problem. Obama wouldn't have started it either. There is no stomach on either part of the parties to upset the banks.
- guelo 7y ago
  Yes, Obama failed us and now Trump is failing us.
  - fatbob 7y ago
    On the other hand, this kind of bank regulation issue seems right in Warren's wheelhouse and the president might have the power to make this happen through their existing bank regulation powers, or maybe through the CFPB...
RickS 7y ago
I have a mixed position on this. Considered in isolation, the UK's API regulations are a spectacular boon for customers. Considered in the context of the rest of the UK's regulatory environment (porn filters, etc), it seems plausible that the UK gov's push for bank APIs is less about being kind to their citizens and more about undermining cash and pushing all financial activity onto infrastructure that's easily accessible to a surveillance state. I'd like to have tech like this in America, but I don't think we have the spine on any front. We aren't willing to hardball businesses on timeline/featureset (for example: the partial and late rollout of chip/pin in the US), and we aren't willing to write legislation that protects citizens from abuse and creates punitive structures that make abuse of citizen data by companies an economically irrational act. In light of that, I wonder if shitty APIs are the lesser of two evils.

rahimnathwani 7y ago

"At first glance, open banking might seem to be a problem for Plaid, but ... developers will still prefer to use one well-built API that abstracts away thousands of financial institutions" This type of centralisation makes me sad, but it's probably true for most startups. By using Plaid or an Open Banking service from another party (e.g. Experian) you'll pay fees to get information you can get for free if you integrate directly with the banks. Even though the open banking APIs are uniform, any company wishing to use them still has to register with each and every bank, and test the integration works with each one. Until you've done it once, it's hard to know whether it will be easy (you write the code once, and it works flawlessly for all banks) or you have edge cases (e.g. some banks have funny timeout issues). So if you're a developer on a deadline, you will likely prefer to use a single API.

imglorp 7y ago
Banking dinosaurs brought this pressure for middle services on themselves by pretending they're not interchangeable services with limited means to tell them apart otherwise. If they'd all support a standard API, plaid would vaporize overnight.
- rahimnathwani 7y ago
  "If they'd all support a standard API, plaid would vaporize overnight." In the UK, the banks already support a standard API, but it's still easier for developers to use an intermediary to access those APIs. Because using Plaid or Experian they don't need per-bank credentials and tests.
  - salawat 7y ago
    >Because using Plaid or Experian they don't need per-bank credentials and tests. They also push all the risk in terms of Plaid being compromised onto the User's, instead of the service provider. This is a winning deal for Plaid, because in the event of an undiscovered breach, there is no proof in the form of say, hackers running off with Plaid's hypothetical Autonomous System's credentials and generating fraudulent activity that can be shut down by just patching the breach and changing Plaid's credentials. Instead, banks have to scratch their heads and figure out why all these seemingly random customers are calling about fraudulent activity at right around the same time. It's absolutely terrible in the diagnostics department, but seemingly ideal for exploiting legal grey areas for avoiding culpability if something goes wrong. I'm not sure federated OAuth is the answer, but it's a damn sight better than what Plaid is doing.

te_chris 7y ago

They have competitors though, Yodlee and Salt Edge to name but two. Have had some 'fun' recently in the UK when the FCA introduced open banking without actually allowing foreign companies any way to particiapte. This broke the budgeting app that I use (Pocketsmith https://www.pocketsmith.com https://www.pocketsmith.com) because Yodlee, the bank feed provider they used, isn't a UK company and neither are they, thus they didn't comply with the regulations. Pocketsmith got around this by adding feeds from Salt Edge, thankfully. I've actually become quite dependent on having proper cashflow, balance sheet and P + L statements for my personal finances.

snowAbstraction 7y ago
There is the Swedish company Tink in this space too. https://tink.com/ https://tink.com/

jka 7y ago

The narrative here is internally consistent but there are a few pieces that I don't quite understand when it meets reality: * It's suggested is that Visa will 'fix' the security concerns that Plaid introduces (the use of username & password collection), but it seems unclear how Visa would be able to change the fundamentals of the Plaid<->bank interactions? * It's also theorized that European banks will prefer to use Plaid rather than a privately recommended solution (not referenced in the article) to achieve EU open banking compliance. Do Plaid have strong relationships with EU banks at present, and would it not be more likely that Plaid would implement against the existing EU open banking APIs (single implementation, no lobbying) than that Plaid would implement their own alternative (requiring per-institution implementation, and also lobbying to ensure their approach is accepted both by banks and EU regulators)?

MBCook 7y ago
On #1 I assume it’s simply the fact that Visa is big enough and stable/reliable enough that banks would be willing to do the integration to them to get the benefits instead of doing hundreds of bespoke integrations for little apps/services.
- jka 7y ago
  The trusted, widespread brand angle does make sense there as a reason for banks to choose to integrate with Visa, agreed. But does that then imply that users authenticate with their bank via Visa (i.e. Visa becoming an identity provider -- not totally unimaginable given their association with customer-issued cards)? Or instead that banks would implicitly offer this data to Plaid/Visa under their card issuance ToS, without user authentication required? (I'm not really asking for answers, I don't think we can really know at this point. It just leads to questions like this and I'm curious)
  - judge2020 7y ago
    User authentication would be handled somewhere :) But ya, I bet they're going to push hard on "provide us openid connect" in future contract negotiations to solve the security problem.

psoots 7y ago

And then it all falls apart when Plaid gets hacked and millions of people's _actual bank account usernames and password_ get stolen. That is not a safe premise to start a business (or to acquire one).

milofeynman 7y ago
And because most companies that use plaid don't even show the Plaid logo, you don't know who is directly integrated with a bank and who is using Plaid
- annexrichmond 7y ago
  Some companies[1] indicate their Plaid dependency in their Privacy Policy, just like it is common to do when they use Google Analytics. But yeah, it's unfortunately not a standard. [1] https://zerodown.com/privacy https://zerodown.com/privacy

cowpig 7y ago

Ben Thompson talks a lot about networks and platforms in his blog, and it's always from the perspective of the capitalist: here's a great way to capture value and make a profit. When he does consider the perspective of the user or consumer, it's still indirectly from the perspective of the capitalist: users/consumers will behave in X way, get Y value, etc, which is why [megacorp] should do Z. I'd really like to see him take a broader view. Could he imagine a set of rules/regulations that would result in a better outcome for the public? I've long been thinking about this problem: - we all much prefer a single platform/network - but if there's a single platform/network, then there aren't good market incentives on the side of the provider This seems like such a fundamental problem in a space he writes so much about. Ben Thompson, please think and write about this!

fatbob 7y ago
Right! Banks are already regulated by the government and this seems like an opportunity for them to improve the retail banking market by requiring interoperation. Maybe it wouldn't work but it would be interesting to hear from him on this topic - can the government make this market work better?

gigatexal 7y ago

I recall a podcast a Plaid tech person did for Software Engineering Daily where it was alluded that Plaid had moved away from using screen scraping to something much better — it sounded like they had paid for connections to the bigger banks — perhaps a one off API access only for Plaid or were leveraging some other way to get around the problematic screen scraping approach.

szhu 7y ago

I had no idea how recently modern credit cards were invented until reading that first paragraph. Wild. https://en.m.wikipedia.org/wiki/Visa_Inc https://en.m.wikipedia.org/wiki/Visa_Inc.