> In the coming weeks, it is expecting to roll out what it refers to as a bank account of the future, which will make it possible to send wire payments and create customized debit cards online.
Or at least a bank account of a normal European bank. At least for the moving money part. I can do that easily and with no fees here in Italy, which isn't the leading light of banking it was 600 years ago.
Hopefully that kind of thing will finally take off in the US. I wonder what the difference is:
> But hastening the movement of money creates risk for banks, because it generally means less time to catch fraudulent transactions.
That's got to be a risk in Europe, too, no? How is it dealt with differently?
I can't speak for Europe. I once griped about the slowness of US banking to an Australian acquaintance who worked in banking technology in Australia and Britain. Here follows my half-remembered, probably inaccurate understanding.
In Australia, a bank has a very high confidence of that a transfer is going from real, physical person A to real, physical person B.
This is because of the "100 Point" identity check you need to perform when you open account. To open a bank account, you need to present multiple, independent forms of ID, including at least a driver's licence or a passport and some identification showing your current residential address.
It can absolutely be circumvented, but the bar for doing so is significantly higher than casual small-time fraudsters are interested in.
In the USA, I can find a small-town bank who will open my account without looking at me too closely, then start issuing dodgy cheques much more easily. In Australia, no matter where I go, I will be required to prove that I am who I say I am. So the ability for banks or police to lay hands on me or my money is significantly strengthened, and consequently the rate of fraud is lower.
I see this also with online shopping. In Australia I never once, in my entire life, had a credit card purchase rejected. In the USA my Bank of America card regularly locks up and waits until I login to assure them that it hasn't been stolen.
> > But hastening the movement of money creates risk for banks, because it generally means less time to catch fraudulent transactions.
> That's got to be a risk in Europe, too, no? How is it dealt with differently?
This is probably the case of someone trying hard to come up with at least some downsides. Most transactions are relatively mundane, and for an automated transaction between two bank databases, there is, I think, very little that can be done in a day that cannot be done instantly. The part that screens fraudulent transactions is very likely already automated, I can't believe it wouldn't be. It's probably not even the most common/dangerous type of fraud.
European banks have collective agreements about money transfers with each other. I imagine it might be harder to implement these schemes if you are the only bank trying and need to cooperate with other banks. Uncompetitive markets can be strange sometimes.
I think most of the difference is in the legal frameworks and contracts. Most US electronic payments (ACH) can be disputed for quite some time after the initial transfer.
Exactly. It often takes only minutes or even seconds from the time that a client pays to the time that the money is visible in my bank account. That's even the case for a transaction from another european country. Online shopping goes like this: you order a product on a company's website, you select your bank, this redirects you to your bank's website where you authenticate the transaction and click OK. No credit cards involved.
"His first discovery was that nearly all banks rely on a few big, and not terribly agile, outside vendors to provide all the software that makes bank computer systems work."
I worked in this industry for about 6 years in the 90s, and there were a few small companies moving all the data center functions over to pc software from mainframes, but most (all?) of them got bought up by the big players. I got out of it when the medium-ish company I worked for got bought up and I got laid off. I heard some of the people I worked with split off and started new tiny companies.
From what I've in the finance industry, there aren't enough standards.
It seems like every bank/broker/data provider stores and sends data in its own format and has different procedures for clearing. It's like the priority is to make sure people can't switch easily.
Wow, this is actually some real innovation in a stagnant industry that actually affects millions. (And it's in the part of the country commonly written off)
This is far more interesting/inspiring and has a much greater impact on the world than the 'break stuff and ignore laws' mentality of Uber and similar Silicon Valley darlings.
To be fair, Kansas does have a GDP almost on par with New Zealand, with just 2.8 million people. Their output per capita is comparable to Denmark. It might not get much press attention, but that's a serious amount of economic activity.
Not that small. Lawrence is the home of the University of Kansas.
I've lived all over the country, and Lawrence would rank towards the top for me. It's much like Austin, only smaller and less expensive. And probably more relaxed. The only drawback is that it's surrounded by Kansas.
Yeah, Lawrence is very much a cool college town. Reminded me a lot of Athens, GA.
On another note about Kansas, I was driving from Kansas City to Wichita on a daytrip with my girlfriend at the time. Like 1995, I think. We stopped in a small town along the way and for some reason found ourselves in this dress shop in a strip mall. It turned out to be a boutique type place, with the dresses at 300-400 each. Weird. Who would have thought they had a market there? Cattle and oil money, I guess.
That store also had a small collection of cassette tapes of Turkish pop music for sale, totally randomly. I bought them all.
At least until the political powerful banks get bothered enough to throw a wrench in their works, at which point those people which condemn Uber's innovations because they violate regulations will need to also condemn this bank's innovations to remain consistent.
The assertion big banks aren't trying to innovate payments because we are in a "risk averse" period after the housing crisis is a stretch. I'm not sure if that's something the author concluded or an argument banks are actually using.
Mortgage loan risks were motivated mostly by greed. Improving money transfer systems would carry the risk of fraud, with a very long-term payout of improving customer experience. Bank CEOs nowadays want there quick buck and then parachute into retirement. There's no incentive for long-term thinking. And if you're dissatisfied where are you going to go? Another mega-bank with the same incentives...
Seeing as how banks just used their lobbying power to cripple Dodd-Frank, the argument "regulations get in the way of innovation" also hard to believe. When regulations got in the way of highly lucrative derivatives sales, it seems the banks were able to overcome.
I really hope these small guys can make a major impact.
If this area is of interest you should also check outhttps://karmiclabs.com. I have no relationship with the company but the founders are friends and think they are doing some really interesting things in the payment and debit card space.
Or at least a bank account of a normal European bank. At least for the moving money part. I can do that easily and with no fees here in Italy, which isn't the leading light of banking it was 600 years ago.
Hopefully that kind of thing will finally take off in the US. I wonder what the difference is:
> But hastening the movement of money creates risk for banks, because it generally means less time to catch fraudulent transactions.
That's got to be a risk in Europe, too, no? How is it dealt with differently?