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> Is there a service where you can deposit money that doesn't increase a bank's power to lend? That's the most significant way banks make money. It costs mone

> Is there a service where you can deposit money that doesn't increase a bank's power to lend? That's the most significant way banks make money. It costs money to have branches, tellers, and armed guards (let alone websites, security teams, forensic-level accounting, marketing, ATMs everywhere, electricity, etc). The way that banks cover all this overhead is to take your deposit at 0% or 1%, then lend it out at 5% (mortgages) to 15% (personal loans). The difference between 0% and 15% gets split between covering bad loans that don't get paid back, and keeping the lights on. It's not that the deposit department supports a loss-making lending division; it's that the two are inseparable. If you wanted a bank that didn't lend out deposits, you'd have to pay a hefty monthly fee for the privilege. It'd be more like a safety deposit box than a "bank" in the way we know of them today. That said, check out credit unions if you prefer a more local banking option that is less likely to make extremely leveraged bets. There are good and bad sides of credit unions, but many people who dislike traditional banks prefer credit unions.

espeed 15y ago
It's not that the deposit department supports a loss-making lending division; it's that the two are inseparable. That's the way things have been done, but I don't believe the two are inseparable. You can eliminate much of the overhead you mention by not having branches and thus no need for tellers or armed guards. For ATMs, you could partner with something like the Allpoint ATM network (http://www.allpointnetwork.com http://www.allpointnetwork.com) -- I believe Simple does this. Because you are not lending money or making investments, you reduce your overall risk and requirements. You're right though, it would be like a safety deposit box -- a digital safety deposit box that's linked to your debit card. A service like this would be disruptive.
- slapshot 15y ago
  So far, I don't see the value proposition. People who don't like big banks use credit unions. Credit union deposits are insured to $250,000, so any risk created by lending is not borne by the consumer. There are plenty of credit unions that still offer free checking with no (or a very small) minimum balance. [1] The only way you could possibly make money to cover your still-not-insignificant costs (you still need all the accounting, marketing, etc, plus paying Allpoint's access fees---they charge a fee to institutions for the privilege of access, there's no free lunch here) is to charge a monthly fee. [2] You're competing against free, and the "we're not a big bank" marketing card has already been played by the credit unions (there is an ongoing radio campaign that plays on just that point). [1] E.g., https://www.navyfederal.org/products-services/checking-savings/checking.php https://www.navyfederal.org/products-services/checking-savin... [2] You could also sell data about your consumers or do other questionable things, but that won't help your "better than a bank" cause.
  - espeed 15y ago
    Banks, and the financial industry in general, exert an enormous amount of influence over the government -- the Occupy Movement and articles like these are indicators of the disgust that has been brewing against the current system, but most feel powerless to do anything about it. Much of a bank's power comes from people depositing their paychecks -- take away the deposits, and you take away the power (http://en.wikipedia.org/wiki/Bank_run http://en.wikipedia.org/wiki/Bank_run). More people don't do this because banks are so convenient and there are few good alternatives. Even credit unions partner with banks so using them doesn't really help. A digital safety deposit box that's linked to your debit card could provide the convenience of a bank, without empowering the banks.

espeed 15y ago

It's not that the deposit department supports a loss-making lending division; it's that the two are inseparable. That's the way things have been done, but I don't believe the two are inseparable. You can eliminate much of the overhead you mention by not having branches and thus no need for tellers or armed guards. For ATMs, you could partner with something like the Allpoint ATM network (http://www.allpointnetwork.com http://www.allpointnetwork.com) -- I believe Simple does this. Because you are not lending money or making investments, you reduce your overall risk and requirements. You're right though, it would be like a safety deposit box -- a digital safety deposit box that's linked to your debit card. A service like this would be disruptive.

slapshot 15y ago
So far, I don't see the value proposition. People who don't like big banks use credit unions. Credit union deposits are insured to $250,000, so any risk created by lending is not borne by the consumer. There are plenty of credit unions that still offer free checking with no (or a very small) minimum balance. [1] The only way you could possibly make money to cover your still-not-insignificant costs (you still need all the accounting, marketing, etc, plus paying Allpoint's access fees---they charge a fee to institutions for the privilege of access, there's no free lunch here) is to charge a monthly fee. [2] You're competing against free, and the "we're not a big bank" marketing card has already been played by the credit unions (there is an ongoing radio campaign that plays on just that point). [1] E.g., https://www.navyfederal.org/products-services/checking-savings/checking.php https://www.navyfederal.org/products-services/checking-savin... [2] You could also sell data about your consumers or do other questionable things, but that won't help your "better than a bank" cause.
- espeed 15y ago
  Banks, and the financial industry in general, exert an enormous amount of influence over the government -- the Occupy Movement and articles like these are indicators of the disgust that has been brewing against the current system, but most feel powerless to do anything about it. Much of a bank's power comes from people depositing their paychecks -- take away the deposits, and you take away the power (http://en.wikipedia.org/wiki/Bank_run http://en.wikipedia.org/wiki/Bank_run). More people don't do this because banks are so convenient and there are few good alternatives. Even credit unions partner with banks so using them doesn't really help. A digital safety deposit box that's linked to your debit card could provide the convenience of a bank, without empowering the banks.