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Happy to answer any questions or take requests for future issues, HN. (This is the second issue of my new weekly newsletter.) Edit to add: Incidentally, while

Happy to answer any questions or take requests for future issues, HN. (This is the second issue of my new weekly newsletter.) Edit to add: Incidentally, while I’m always thrilled when my stuff ends up on the front page, I’m also a member of this community and know that there’s a limited tolerance for the same sites ending up on here on a weekly basis. In previous years I spaced out releasing essays to not annoy y’all, but I can’t do that with a weekly newsletter, so if folks can be selective in submitting these here I’d appreciate it.

axg11 5y ago
Just let the market decide ;)
TameAntelope 5y ago
Okay, so the obvious question is... crypto. Do these large institutions have any interest in opening up interfaces to the crypto ecosystem, are they skeptical as hell about the concept generally, is the technology mature enough to start seeing integration with common tasks like sending money in these popular "instant" apps (e.g. Venmo uses a stablecoin to transfer money, without even showing the crypto part to the user)? I'm wondering if my local credit union wants to hold my BTC for me, if I wanted to do something like that.
- handrous 5y ago
  > I'm wondering if my local credit union wants to hold my BTC for me, if I wanted to do something like that. They'll do that now with a piece of paper in a safe deposit box, no? Other options for their holding your BTC, including ones that let them make money off it and so offer interest to depositors, seem like they'd open up the same risks as existing relatively-reputable exchanges.
  - Meekro 5y ago
    A piece of paper in a safe deposit box is, unfortunately, not risk-free. There have been some incidents where, for example, the owner of box #1343 loses his key and asks the bank to drill the box, so they drill box #1434 and give him the contents (hopefully your paper wallet does not say "MILLIONS OF DOLLARS IN UNTRACEABLE EASY-TO-STEAL CRYPTO" at the top!) Also, floods have resulted in box contents being destroyed (a bigger problem in some cities than others.)
    - kamarg 5y ago
      Not to mention most safe deposit boxes are insured for a few hundred dollars max unless you've specifically bought additional insurance. So if the bank does screw up and give your box contents to someone else, you can only recover a very minimal amount of the value.
      - ClumsyPilot 5y ago
        At that point you might as well buy insurance directly and skip a step
- stevebmark 5y ago
  You mean a system built on Proof of Waste where it takes minutes to confirm transactions using large amounts of energy purely to guess random numbers, that's literally designed to get harder and generate more waste the more it's used, and is full of scams and treated purely as a highly volatile commodity with limited realized practical use, where blockchain "technology" is so poor that you can only put a URL in a block, so NFTs aren't connected to anything (and used for many scams), and where each news article about smart contract failures is somehow more hilarious than the last? I sure hope banks don't navigate into this space.
  - whimsicalism 5y ago
    I'm hardly a crypto-stan, but I get tired of the same recycled complaints. There's a move towards PoS, crypto is not synonymous with PoW. You'll be displeased to know that scams occur with fiat as well as crypto.
  - throwaway98797 5y ago
    Buy a nft. See if that changes your perspective.
mdp2021 5y ago
What about security? A number of innovations seem to overrely on new options which could offer potential for breach.
tl 5y ago
Unfortunately the market-clearing price (in karma) for someone posting your article is greater than zero, ensuring that nothing short of regulation would prevent it.
mherdeg 5y ago
How does the best price you give for JPY->USD ($10 for $1,000 with Wise) compare with OANDA fxTrade? I think their current posted fees are 1.4% spread-only ($14 for $1000) or 0.3% spread plus core fees. I can't quite tell from the rate sheet but looks like 550 JPY for a 100,000 JPY trade. I guess that would work out to about … $8.50 per $1000? Is that right? If you have a local bank that allows foreign depositors to exchange at 0.3 JPY/1 USD, does that mean you pay about $2.50 to convert 1000 USD?
- patio11 5y ago
  If one has to do this frequently and in size the best way I’m aware of is Interactive Brokers, but for most customers doing $1k transactions (like me back in 2004 to pay my student loans) $8.50 and $10 are the same number but the $60 the best option cost back then (GoLloyds, now operated by Shinsei, if anyone is curious) was not.
  - ska 5y ago
    This is key I think. Paying a couple extra dollars for convenience to avoid getting screwed by retail rates on $1000 or so once in a while is an easy yes. OTOH, if you are even at 5-6 figures regularly you start paying attention to all the fractions, and bit more pain in the ass interface is fine. At one point I used to do this directly with a FX desk which was a bit fiddly but saved me a bunch over a few years.
    - mherdeg 5y ago
      It's true when I was routinely repatriating income with a forex trading desk the experience was not totally streamlined and paying attention to the spread and rates pretty closely. But also I got out "lucky" by exiting at 1 GBP/1.62 USD (moved home a while back), and the timing mattered a lot more than the rates
- jslove 5y ago
  Oanda uses Western Union in its back end. They gave up their license for money transfer a while back due to regulatory issues. Stellar blockchain is trying to do something innovative in this space but is slow to get volumes.
tantalor 5y ago
The innovation I've been waiting for is FedCoin (digital dollar). The details are a little hazy, but I'm expecting real instant transfers (not just between people but also between your own accounts at different institutions) and free access for everybody in the US. Like crypto, but with real money.
- effie 5y ago
  It's supposed to be centralized, no nothing like crypto-assets. More like tighter FED/government control of the "new dollar".
- rfd4sgmk8u 5y ago
  Central Bank Digital Currencies are a dystopian nightmare. They permit all kinds of financial shenanigans like automated negative interest rate, demurrage, financial censorship and control. Cryptocurrency already is real money. Its more real than anything the state can print from nothing.
  - ClumsyPilot 5y ago
    "Central Bank Digital Currencies are a dystopian nightmare. They permit all kinds of financial shenanigans like automated negative interest rate" We've had that for years, all banks can adjust interest rate and block accounts.
    - effie 5y ago
      But you could change the bank or use some alternative. If legacy currency is sunset in favor of centrally controlled currency (where the bank has no latitude and just does what central bank says), all those alternatives may disappear.
  - mountainofdeath 5y ago
    Most of the advantages cryptocurrency fall into one two categories. 1. Speed improvements over the legacy infrastructure e.g. instant transfers without a middleman. Itself, mostly a problem just in the USA. 2. Bypassing various international and national regulations. Central bank digital currency retains #1 while rejecting #2 which is important for a nation's sovereignty.
Folcon 5y ago
Reading this segment feels like it was terminated prematurely? > Free checking wasn’t free. Instead of most depositors paying a predictable (and relatively small) fee for their checking account, a tiny portion of the depositor base was assessed many, many $25-$35 fees stochastically based on how frequently their incomings and outgoings were temporarily mismatched. Specifically the "depositor base was assessed many, many" part. Feels like the many before the comma is missing something. Maybe it should be times? "a tiny portion of the depositor base was assessed many times, many $25-$35 fees stochastically" Not certain though.
- Arcuru 5y ago
  It is an odd piece of grammar, but I've heard it fairly often. I'm not sure if it's proper English or not. "many, many" is a different way of emphasizing the word "many". So "assessed many, many fees" implies that there were more fees assessed than if they had just stated "assessed many fees".
  - Folcon 5y ago
    Interesting, thanks for the heads up.
- xsmasher 5y ago
  Some of the depositors were assessed "many, many $25-$35 fees." Could have been rewritten as "repeatedly assessed $25-$35 fees" but it's understandable to me.
  - Folcon 5y ago
    I'd agree with that rewording =)... Just was a bit of a mental hiccup when I was reading which is probably why I picked up on it.
frogpelt 5y ago
You left out fee-free stock trading which is commonplace now. Maybe you were intentionally focused more on the banking side.
- ikr678 5y ago
  Is the innovation in this space for the individual trader or for the other firms that are buying the trade order data to frontrun the market?
  - frogpelt 5y ago
    I didn't know about this. I'm intrigued.
simonebrunozzi 5y ago
Hey Patrick, I always enjoy reading your stuff. For this particular piece, it's a pity that you don't have a specific view on Europe. I'm sure it's difficult to know every detail. Perhaps it's a good opportunity to involve someone at Stripe who knows e.g. the European side of things? Or even how things are in Africa? (Matteo Rizzi of Fintechstage comes to mind, amazing experience in anything fintech-related in Africa).
- dr_dshiv 5y ago
  Not to be super cynical, but it would be embarrassing and reveal that there is not really any innovation. I kept cringing and thinking “didn’t they do this in Europe (Netherlands) decades ago?”
umeshunni 5y ago
Great post that provides an overview of recent changes in banking. Something you should add here is that free banking is also made possible due to the economics of the Durbin Amendment of the 2010 Dodd Frank act that allows smaller financial institutions to charge a higher interchange fees on debit transactions. Most Fintech/Neobank players like Chime fall into this bucket and they are able to fund the operational cost of the checking account with the interchange fees of the debit card.
- ksdale 5y ago
  I believe he mentioned that in the first newsletter!

axg11 5y ago

Just let the market decide ;)

TameAntelope 5y ago

Okay, so the obvious question is... crypto. Do these large institutions have any interest in opening up interfaces to the crypto ecosystem, are they skeptical as hell about the concept generally, is the technology mature enough to start seeing integration with common tasks like sending money in these popular "instant" apps (e.g. Venmo uses a stablecoin to transfer money, without even showing the crypto part to the user)? I'm wondering if my local credit union wants to hold my BTC for me, if I wanted to do something like that.

handrous 5y ago
> I'm wondering if my local credit union wants to hold my BTC for me, if I wanted to do something like that. They'll do that now with a piece of paper in a safe deposit box, no? Other options for their holding your BTC, including ones that let them make money off it and so offer interest to depositors, seem like they'd open up the same risks as existing relatively-reputable exchanges.
- Meekro 5y ago
  A piece of paper in a safe deposit box is, unfortunately, not risk-free. There have been some incidents where, for example, the owner of box #1343 loses his key and asks the bank to drill the box, so they drill box #1434 and give him the contents (hopefully your paper wallet does not say "MILLIONS OF DOLLARS IN UNTRACEABLE EASY-TO-STEAL CRYPTO" at the top!) Also, floods have resulted in box contents being destroyed (a bigger problem in some cities than others.)
  - kamarg 5y ago
    Not to mention most safe deposit boxes are insured for a few hundred dollars max unless you've specifically bought additional insurance. So if the bank does screw up and give your box contents to someone else, you can only recover a very minimal amount of the value.
    - ClumsyPilot 5y ago
      At that point you might as well buy insurance directly and skip a step
stevebmark 5y ago
You mean a system built on Proof of Waste where it takes minutes to confirm transactions using large amounts of energy purely to guess random numbers, that's literally designed to get harder and generate more waste the more it's used, and is full of scams and treated purely as a highly volatile commodity with limited realized practical use, where blockchain "technology" is so poor that you can only put a URL in a block, so NFTs aren't connected to anything (and used for many scams), and where each news article about smart contract failures is somehow more hilarious than the last? I sure hope banks don't navigate into this space.
- whimsicalism 5y ago
  I'm hardly a crypto-stan, but I get tired of the same recycled complaints. There's a move towards PoS, crypto is not synonymous with PoW. You'll be displeased to know that scams occur with fiat as well as crypto.
- throwaway98797 5y ago
  Buy a nft. See if that changes your perspective.

mdp2021 5y ago

What about security? A number of innovations seem to overrely on new options which could offer potential for breach.

tl 5y ago

Unfortunately the market-clearing price (in karma) for someone posting your article is greater than zero, ensuring that nothing short of regulation would prevent it.

mherdeg 5y ago

How does the best price you give for JPY->USD ($10 for $1,000 with Wise) compare with OANDA fxTrade? I think their current posted fees are 1.4% spread-only ($14 for $1000) or 0.3% spread plus core fees. I can't quite tell from the rate sheet but looks like 550 JPY for a 100,000 JPY trade. I guess that would work out to about … $8.50 per $1000? Is that right? If you have a local bank that allows foreign depositors to exchange at 0.3 JPY/1 USD, does that mean you pay about $2.50 to convert 1000 USD?

patio11 5y ago
If one has to do this frequently and in size the best way I’m aware of is Interactive Brokers, but for most customers doing $1k transactions (like me back in 2004 to pay my student loans) $8.50 and $10 are the same number but the $60 the best option cost back then (GoLloyds, now operated by Shinsei, if anyone is curious) was not.
- ska 5y ago
  This is key I think. Paying a couple extra dollars for convenience to avoid getting screwed by retail rates on $1000 or so once in a while is an easy yes. OTOH, if you are even at 5-6 figures regularly you start paying attention to all the fractions, and bit more pain in the ass interface is fine. At one point I used to do this directly with a FX desk which was a bit fiddly but saved me a bunch over a few years.
  - mherdeg 5y ago
    It's true when I was routinely repatriating income with a forex trading desk the experience was not totally streamlined and paying attention to the spread and rates pretty closely. But also I got out "lucky" by exiting at 1 GBP/1.62 USD (moved home a while back), and the timing mattered a lot more than the rates
jslove 5y ago
Oanda uses Western Union in its back end. They gave up their license for money transfer a while back due to regulatory issues. Stellar blockchain is trying to do something innovative in this space but is slow to get volumes.

tantalor 5y ago

The innovation I've been waiting for is FedCoin (digital dollar). The details are a little hazy, but I'm expecting real instant transfers (not just between people but also between your own accounts at different institutions) and free access for everybody in the US. Like crypto, but with real money.

effie 5y ago
It's supposed to be centralized, no nothing like crypto-assets. More like tighter FED/government control of the "new dollar".
rfd4sgmk8u 5y ago
Central Bank Digital Currencies are a dystopian nightmare. They permit all kinds of financial shenanigans like automated negative interest rate, demurrage, financial censorship and control. Cryptocurrency already is real money. Its more real than anything the state can print from nothing.
- ClumsyPilot 5y ago
  "Central Bank Digital Currencies are a dystopian nightmare. They permit all kinds of financial shenanigans like automated negative interest rate" We've had that for years, all banks can adjust interest rate and block accounts.
  - effie 5y ago
    But you could change the bank or use some alternative. If legacy currency is sunset in favor of centrally controlled currency (where the bank has no latitude and just does what central bank says), all those alternatives may disappear.
- mountainofdeath 5y ago
  Most of the advantages cryptocurrency fall into one two categories. 1. Speed improvements over the legacy infrastructure e.g. instant transfers without a middleman. Itself, mostly a problem just in the USA. 2. Bypassing various international and national regulations. Central bank digital currency retains #1 while rejecting #2 which is important for a nation's sovereignty.

Folcon 5y ago

Reading this segment feels like it was terminated prematurely? > Free checking wasn’t free. Instead of most depositors paying a predictable (and relatively small) fee for their checking account, a tiny portion of the depositor base was assessed many, many $25-$35 fees stochastically based on how frequently their incomings and outgoings were temporarily mismatched. Specifically the "depositor base was assessed many, many" part. Feels like the many before the comma is missing something. Maybe it should be times? "a tiny portion of the depositor base was assessed many times, many $25-$35 fees stochastically" Not certain though.

Arcuru 5y ago
It is an odd piece of grammar, but I've heard it fairly often. I'm not sure if it's proper English or not. "many, many" is a different way of emphasizing the word "many". So "assessed many, many fees" implies that there were more fees assessed than if they had just stated "assessed many fees".
- Folcon 5y ago
  Interesting, thanks for the heads up.
xsmasher 5y ago
Some of the depositors were assessed "many, many $25-$35 fees." Could have been rewritten as "repeatedly assessed $25-$35 fees" but it's understandable to me.
- Folcon 5y ago
  I'd agree with that rewording =)... Just was a bit of a mental hiccup when I was reading which is probably why I picked up on it.

frogpelt 5y ago

You left out fee-free stock trading which is commonplace now. Maybe you were intentionally focused more on the banking side.

ikr678 5y ago
Is the innovation in this space for the individual trader or for the other firms that are buying the trade order data to frontrun the market?
- frogpelt 5y ago
  I didn't know about this. I'm intrigued.

simonebrunozzi 5y ago

Hey Patrick, I always enjoy reading your stuff. For this particular piece, it's a pity that you don't have a specific view on Europe. I'm sure it's difficult to know every detail. Perhaps it's a good opportunity to involve someone at Stripe who knows e.g. the European side of things? Or even how things are in Africa? (Matteo Rizzi of Fintechstage comes to mind, amazing experience in anything fintech-related in Africa).

dr_dshiv 5y ago
Not to be super cynical, but it would be embarrassing and reveal that there is not really any innovation. I kept cringing and thinking “didn’t they do this in Europe (Netherlands) decades ago?”

umeshunni 5y ago

Great post that provides an overview of recent changes in banking. Something you should add here is that free banking is also made possible due to the economics of the Durbin Amendment of the 2010 Dodd Frank act that allows smaller financial institutions to charge a higher interchange fees on debit transactions. Most Fintech/Neobank players like Chime fall into this bucket and they are able to fund the operational cost of the checking account with the interchange fees of the debit card.

ksdale 5y ago
I believe he mentioned that in the first newsletter!