10 ms·

Maybe I care too much about market power and consolidation, but this part struck me: > [Simple] was purchased by BBVA in 2014. > BBVA said in January that it w

by sayhar 5y ago

Maybe I care too much about market power and consolidation, but this part struck me: > [Simple] was purchased by BBVA in 2014. > BBVA said in January that it would be shutting down Simple later in 2021. The decision came from the company “reassessing its goals” as part of a planned sale to PNC Bank, which reached an agreement to acquire BBVA’s US operations in November 2020. The consolidation problem seems to be getting worse everywhere. [1]. Gotta imagine they're connected. [2] https://concentrationcrisis.openmarketsinstitute.org/ https://concentrationcrisis.openmarketsinstitute.org/

vmception 5y ago
This is just irony. Try not to read too hard into it.
hardwaresofton 5y ago
This has been happening everywhere over the last decade or so, and it's the result of super loose fiscal policy. When debt is cheap for megacorps, banks and high net worth individual, money creation goes into over-drive, but not for cash strapped companies or individuals. Central banks doubled down on this last year as well -- it's debatable whether it's what they had to do or not but at this point I'm convinced all central banks really do is start bubbles and encourage moral hazard. Monopolies and duopolies emerging left and right. "Tech" Startups these days look more and more like convenient customer/innovation acquisition vehicles for inevitable big fish and less like small businesses.
- toomuchtodo 5y ago
  True. So treat deposit accounts and instant payments as a utility and have the Fed hand them out to everyone. If you want to offer something more fancy as a fintech or commercial bank, go for it if you can make the economics work. Search keywords for more info on this topic: “FedAccounts”, “Banking for All” Disclosure: I am actively advocating for this policy with policymakers.
  - clairity 5y ago
    having a public option that’s not subsidized and competing fairly is a reasonable policy. the biggest potential issue i see is having the federal govt middle-manning all those otherwise private financial transactions, but that could be mitigated by having a private and a public bank account, with instant transfers to move money back and forth. and offering these through the usps seems like a winning move, through their well-established post offices all across the country (at least the ones not sold off at fire-sale prices in the past few administrations).
  - hardwaresofton 5y ago
    That sounds like something that should definitely happen -- my worry is regulatory capture. I have very little confidence in the ability of politicians and related agencies to predict and defend against the machinations of private industry who would try to eke out a corner of the government-mandated gravy train for themselves for all time. Would FedAccounts be essentially FedWire extended for regular people? It seems like governments don't really share information otherwise we could just lift the tech from Sweden (Swish). It would be an absolute sea change, but I want I want to starve is the finance beast as a whole -- the hedge funds that front-run and sometimes directly exploit pension funds, etc. I personally think that one of the biggest things someone could do to unwind the current financial system's largess is just ply a bunch of money/expertise/tech at improving credit unions. I maintain an account at a credit union and I absolutely love it, the people that worked there actually seemed happy, plugged in to the local economy and society. It is bonkers to me that anyone still banks at the large institutions (the ones famous for overdraft "protection") with local credit unions being as good as they are (and often very competitive on rates). If the large institutions don't get all the deposit flow, then they can't offer the huge leverage to the firms, HNW individuals, etc -- credit unions aren't going to be out there offering 15x+ leverage to Archegos Capital. Since what I've written is essentially a wishlist/vapor-policy, let's reinstate Glass-Steagall while we're at it.
    - ryandrake 5y ago
      > It is bonkers to me that anyone still banks at the large institutions (the ones famous for overdraft "protection") with local credit unions being as good as they are (and often very competitive on rates). And whenever you ask someone why the hell they use UltraMegaBankOfAbuse, they always cite some far fetched scenario that makes Credit Unions slightly less convenient. “Well, if I ever found myself in the deserts of Morocco, and needed to use an ATM to pay my electric bill, there wouldn’t be a Credit Union branch there, so checkmate! I obviously need to bank with Chase!” It’s like they are looking for any excuse to abuse themselves.
- lotsofpulp 5y ago
  > This has been happening everywhere over the last decade or so, and it's the result of super loose fiscal policy. It’s not just loose fiscal policy, it’s also technology’s role in reducing marginal costs. It’s basically impossible for a smaller player to compete in commodity markets like consumer banking because the bigger player has lower marginal costs and can offer a more attractive price. The same as Walmart/Target/Home Depot/Lowes/Best Buy dominating retail.
- PeterisP 5y ago
  "last decade or so" ? The banking consolidation trend started in late 1980s and has been happening steadily ever since, it happened a lot with the 1990s fiscal policy and it happened a lot with 2000-2010 fiscal policy.
  - hardwaresofton 5y ago
    Ahh sorry my internal clock still thinks it’s ~2015ish, I should have said multiple decades — I was thinking basically after the 2000s
throwaway481048 5y ago
Sadly, the act of many “traditional” companies acquiring relevant and/or competing businesses seems to simply lessen competition. So much for utilizing that acquisition’s unique edge on the market in terms of product, team, etc... While certainly a privilege, I empathize with founders who reach their “exit” dream, yet remain in a moral conundrum over whether what they just did actually benefits anyone but themselves.
brutal_chaos_ 5y ago
Antitrust is not a thing in America anymore. (Ok, my opinion, but really? Has there been any major antitrust suits since the Microsoft one? Please do say so if there was, I'd be interested in reading the case(s)).
- astura 5y ago
  DoJ blocked AT&T from purchasing TMobile. https://en.m.wikipedia.org/wiki/Attempted_purchase_of_T-Mobile_USA_by_AT%26T https://en.m.wikipedia.org/wiki/Attempted_purchase_of_T-Mobi... However, TMobile went on to purchase Sprint, so...
  - casefields 5y ago
    Which is a slightly better outcome. Had it gone through Verizon would've bought Sprint leaving us with a real duopoly.
linsomniac 5y ago
IIRC, the 2014 transition to BBVA (from Compass) also didn't go entirely smoothly. I had to contact support in that, and ISTR they said they were really slammed because of issues with the transition. My problem ended up being that I was withdrawing money from an ATM saying it was a "Savings Account" rather then "Checking", which used to work but stopped in the transition. Took a few weeks to figure out that was the problem though, because they were having other issues as well.
- floatingatoll 5y ago
  I believe that Simple launched on Bancorp and then transitioned to BBVA Compass after their acquisition by BBVA. (BBVA bought Compass in 2007, Simple in 2014, and folded the Compass brand in 2019.)
  - linsomniac 5y ago
    Thank you, yes, Bancorp was totally what I was thinking of.
tptacek 5y ago
Did BBVA "consolidate" Simple, or provide a soft landing for them? If Simple wasn't long-term viable anyways, it's hard to see consolidation as the problem here.
- tadfisher 5y ago
  We could have been viable. We were also the first movers, and had a uniquely bad scenario that required an immediate sale. Younger competitors are in the news for their $1b+ valuations (Chime).
  - relyks 5y ago
    Simple was way better than Chime, Varo, or any of the other newer "millennial" banks. It's a shame it didn't work out :(
  - sayhar 5y ago
    What was the scenario?
    - tadfisher 5y ago
      We had courted an investor and our runway ran right up until the expected cash from said investor. At the last second, the investor pulled out of the deal. The cofounders and key team members mortgaged their homes to make payroll while we searched for a buyer to keep the company going. That buyer ended up being BBVA, and the rest is history.
      - tptacek 5y ago
        Right, so: BBVA didn't so much target Simple for "consolidation" so much as rescue the employees of Simple.
freetanga 5y ago
Banking is expensive- not only on operational topics, but also on Risk Coverage. Too much capital required, little returns on capital tied down. So it’s becoming increasingly difficult for smaller CUs to grow - they are doom to stagnate or merge. Concentration is somewhat inevitable, sadly. BTW Simple was not a real bank per se, most of the back office and core IT services (which amount to 80pc of non-branches cost) was provided by BBVA Compass (meaning BBVA had already consolidated IT and Ops in the US 5 y ago, to reduce capital contraints.
URSpider94 5y ago
This country has sooo many banks. So many. I don’t see consolidation as a big problem in the banking industry.
- criddell 5y ago
  If they are too big to fail, then they are too big.
  - URSpider94 5y ago
    None of them are too big to fail. We have proven that. All banks should be regulated properly so that they can withstand risks from market excursions. In addition, all bank deposits are insured.

by sayhar 5y ago

vmception 5y ago

This is just irony. Try not to read too hard into it.

hardwaresofton 5y ago

This has been happening everywhere over the last decade or so, and it's the result of super loose fiscal policy. When debt is cheap for megacorps, banks and high net worth individual, money creation goes into over-drive, but not for cash strapped companies or individuals. Central banks doubled down on this last year as well -- it's debatable whether it's what they had to do or not but at this point I'm convinced all central banks really do is start bubbles and encourage moral hazard. Monopolies and duopolies emerging left and right. "Tech" Startups these days look more and more like convenient customer/innovation acquisition vehicles for inevitable big fish and less like small businesses.

toomuchtodo 5y ago
True. So treat deposit accounts and instant payments as a utility and have the Fed hand them out to everyone. If you want to offer something more fancy as a fintech or commercial bank, go for it if you can make the economics work. Search keywords for more info on this topic: “FedAccounts”, “Banking for All” Disclosure: I am actively advocating for this policy with policymakers.
- clairity 5y ago
  having a public option that’s not subsidized and competing fairly is a reasonable policy. the biggest potential issue i see is having the federal govt middle-manning all those otherwise private financial transactions, but that could be mitigated by having a private and a public bank account, with instant transfers to move money back and forth. and offering these through the usps seems like a winning move, through their well-established post offices all across the country (at least the ones not sold off at fire-sale prices in the past few administrations).
- hardwaresofton 5y ago
  That sounds like something that should definitely happen -- my worry is regulatory capture. I have very little confidence in the ability of politicians and related agencies to predict and defend against the machinations of private industry who would try to eke out a corner of the government-mandated gravy train for themselves for all time. Would FedAccounts be essentially FedWire extended for regular people? It seems like governments don't really share information otherwise we could just lift the tech from Sweden (Swish). It would be an absolute sea change, but I want I want to starve is the finance beast as a whole -- the hedge funds that front-run and sometimes directly exploit pension funds, etc. I personally think that one of the biggest things someone could do to unwind the current financial system's largess is just ply a bunch of money/expertise/tech at improving credit unions. I maintain an account at a credit union and I absolutely love it, the people that worked there actually seemed happy, plugged in to the local economy and society. It is bonkers to me that anyone still banks at the large institutions (the ones famous for overdraft "protection") with local credit unions being as good as they are (and often very competitive on rates). If the large institutions don't get all the deposit flow, then they can't offer the huge leverage to the firms, HNW individuals, etc -- credit unions aren't going to be out there offering 15x+ leverage to Archegos Capital. Since what I've written is essentially a wishlist/vapor-policy, let's reinstate Glass-Steagall while we're at it.
  - ryandrake 5y ago
    > It is bonkers to me that anyone still banks at the large institutions (the ones famous for overdraft "protection") with local credit unions being as good as they are (and often very competitive on rates). And whenever you ask someone why the hell they use UltraMegaBankOfAbuse, they always cite some far fetched scenario that makes Credit Unions slightly less convenient. “Well, if I ever found myself in the deserts of Morocco, and needed to use an ATM to pay my electric bill, there wouldn’t be a Credit Union branch there, so checkmate! I obviously need to bank with Chase!” It’s like they are looking for any excuse to abuse themselves.
lotsofpulp 5y ago
> This has been happening everywhere over the last decade or so, and it's the result of super loose fiscal policy. It’s not just loose fiscal policy, it’s also technology’s role in reducing marginal costs. It’s basically impossible for a smaller player to compete in commodity markets like consumer banking because the bigger player has lower marginal costs and can offer a more attractive price. The same as Walmart/Target/Home Depot/Lowes/Best Buy dominating retail.
PeterisP 5y ago
"last decade or so" ? The banking consolidation trend started in late 1980s and has been happening steadily ever since, it happened a lot with the 1990s fiscal policy and it happened a lot with 2000-2010 fiscal policy.
- hardwaresofton 5y ago
  Ahh sorry my internal clock still thinks it’s ~2015ish, I should have said multiple decades — I was thinking basically after the 2000s

throwaway481048 5y ago

Sadly, the act of many “traditional” companies acquiring relevant and/or competing businesses seems to simply lessen competition. So much for utilizing that acquisition’s unique edge on the market in terms of product, team, etc... While certainly a privilege, I empathize with founders who reach their “exit” dream, yet remain in a moral conundrum over whether what they just did actually benefits anyone but themselves.

brutal_chaos_ 5y ago

Antitrust is not a thing in America anymore. (Ok, my opinion, but really? Has there been any major antitrust suits since the Microsoft one? Please do say so if there was, I'd be interested in reading the case(s)).

astura 5y ago
DoJ blocked AT&T from purchasing TMobile. https://en.m.wikipedia.org/wiki/Attempted_purchase_of_T-Mobile_USA_by_AT%26T https://en.m.wikipedia.org/wiki/Attempted_purchase_of_T-Mobi... However, TMobile went on to purchase Sprint, so...
- casefields 5y ago
  Which is a slightly better outcome. Had it gone through Verizon would've bought Sprint leaving us with a real duopoly.

linsomniac 5y ago

IIRC, the 2014 transition to BBVA (from Compass) also didn't go entirely smoothly. I had to contact support in that, and ISTR they said they were really slammed because of issues with the transition. My problem ended up being that I was withdrawing money from an ATM saying it was a "Savings Account" rather then "Checking", which used to work but stopped in the transition. Took a few weeks to figure out that was the problem though, because they were having other issues as well.

floatingatoll 5y ago
I believe that Simple launched on Bancorp and then transitioned to BBVA Compass after their acquisition by BBVA. (BBVA bought Compass in 2007, Simple in 2014, and folded the Compass brand in 2019.)
- linsomniac 5y ago
  Thank you, yes, Bancorp was totally what I was thinking of.

tptacek 5y ago

Did BBVA "consolidate" Simple, or provide a soft landing for them? If Simple wasn't long-term viable anyways, it's hard to see consolidation as the problem here.

tadfisher 5y ago
We could have been viable. We were also the first movers, and had a uniquely bad scenario that required an immediate sale. Younger competitors are in the news for their $1b+ valuations (Chime).
- relyks 5y ago
  Simple was way better than Chime, Varo, or any of the other newer "millennial" banks. It's a shame it didn't work out :(
- sayhar 5y ago
  What was the scenario?
  - tadfisher 5y ago
    We had courted an investor and our runway ran right up until the expected cash from said investor. At the last second, the investor pulled out of the deal. The cofounders and key team members mortgaged their homes to make payroll while we searched for a buyer to keep the company going. That buyer ended up being BBVA, and the rest is history.
    - tptacek 5y ago
      Right, so: BBVA didn't so much target Simple for "consolidation" so much as rescue the employees of Simple.

freetanga 5y ago

Banking is expensive- not only on operational topics, but also on Risk Coverage. Too much capital required, little returns on capital tied down. So it’s becoming increasingly difficult for smaller CUs to grow - they are doom to stagnate or merge. Concentration is somewhat inevitable, sadly. BTW Simple was not a real bank per se, most of the back office and core IT services (which amount to 80pc of non-branches cost) was provided by BBVA Compass (meaning BBVA had already consolidated IT and Ops in the US 5 y ago, to reduce capital contraints.

URSpider94 5y ago

This country has sooo many banks. So many. I don’t see consolidation as a big problem in the banking industry.

criddell 5y ago
If they are too big to fail, then they are too big.
- URSpider94 5y ago
  None of them are too big to fail. We have proven that. All banks should be regulated properly so that they can withstand risks from market excursions. In addition, all bank deposits are insured.