7 ms·

Open Banking and Payments Competition

155 points by smitop 1y ago

contingencies 1y ago
HN darling but ... thumbs down. Seemingly no insight. Long read (skipped most). IMHO largely valueless opine and supposition. I think we already know bankers bank, corporations can't innovate, and regulations are abused for protectionism.
- theendisney 1y ago
  I had a funny chat in the 90s with soneone in charge of a bank. The thing was, they wanted me to supply a business plan. I know how to write those but find it mysterious that they want me to write it for all completely unorriginal businesses. If one wants to start a shoe store one should simply investigate the demography and map the varous shoe stores nearby. The bank is in a position to do that cheaply for their entire service area. Innovation would be to put the opportunities in the window display. Their standard plan can have everything they look for. No need to complaint that the guy who hapoens to be good at baking bread forgot something. If the data checks out you can give much larger lones with more interest. If there are many holes in the coverage you sell someone a lone for a franchise. It was a funny chat because everything was impossible, even a bank director should not submit ideas.
  - EGreg 1y ago
    Well of course. That’s how most gatekeepers act. Why does every employee in the US need to pay an accountant to file their corporate payroll taxes, when the corporation knows how much they paid and can just use THEIR accountant to report this same information? It would be standard across many employees. And in Europe that’s largely what’s done. But in USA this creates many “bullshit jobs”. The IRS just closed their free file under Trump admin, and even when they had it, you had no way to electronically submit business taxes, and even if you mailed those to the IRS (still allowed) some states have NO WAY for you to file taxes without an accountant! To open an LLC in NY you must announce it in a specific newspaper they tell you. And that newspaper charges $700. Same thing — they lobby to keep this going.
    - eadmund 1y ago
      > Why does every employee in the US need to pay an accountant to file their corporate payroll taxes, when the corporation knows how much they paid and can just use THEIR accountant to report this same information? How would my employer know how much money my savings, chequing and investment accounts make? I owe taxes on all of those as well as on my income. How would my employer know what interest I pay on my mortgage, how much I contribute to charity and my other deductible expenses? > some states have NO WAY for you to file taxes without an accountant Which ones?
    - lotsofpulp 1y ago
      >Why does every employee in the US need to pay an accountant to file their corporate payroll taxes, when the corporation knows how much they paid and can just use THEIR accountant to report this same information? You don't need an accountant, and employees do not pay "corporate payroll taxes", they usually just pay income tax to the federal government. And if you think tax liability is based solely on amount of pay received from an employer, then I think you must not have any experience with paying income taxes in the US. >The IRS just closed their free file under Trump admin Free Fillable Forms is still available for electronic submissions. What closed was the government provided alternative to guided tax preparation software like TurboTax. > some states have NO WAY for you to file taxes without an accountant! I doubt this. Please provide an example.
  - Danieru 1y ago
    The business plan is not about the business plan. It's only even half about the business. Instead it is about the businessman making the pitch. If someone is good at baking bread that suggest they are qualified to to bake bread. Running a bakery is a super set of that skill. The business plan request is a fantastic method to give such a person a chance to show they have the right resources, enough experience, and reasonable expectations and strong commitment.
  - omcnoe 1y ago
    The bank isn't so interested in whether it's a good idea to open a shoe store or not, but in whether you as the person asking for lending has the skillset to actually execute on that plan. Asking the person who wants lending to write the plan is the easiest way to check this.
- EGreg 1y ago
  HN anathema: crypto and blockchain — can and does trivially solve the issues Patrick writes about. You can easily make sure the account has enough money, without knowing whose account it is. Crypto is “buyer beware”. The traditional fintech system is “seller beware”. But crypto is programmable and in theory you could easily make use of arbitration, resolution of disputes, and periodic payouts etc. All without being forced into the bundle of services you don’t control, that banks saddle you with.
  - ranger207 1y ago
    Crypto and blockchain by itself does not solve any of these problems. It's merely a payments system that happens to be on a computer natively. There's nothing technical preventing banks from getting together and making Open Banking a well-supported thing like they're supposed to be doing; it's all just code and contracts in the end. It's not that they can't, it's that they won't, and they won't for business and political reasons. Crypto is subject to the same pressures but doesn't have the same regulations to constrain their actions. Crypto's better ability to eg do international payments is not because of any technical reason but simply because they don't have the same regulations and inertia of the traditional banking system. While the traditional banking system has problems with its regulations making things too hard to do, many people prefer it to the easier to screw up wild west of crypto payments. Lots of people like the FDIC making sure their savings aren't wiped out if the bank lies on its balance sheet, or the ability to claw back money transfers if someone breaks into their account. Crypto could certainly provide those services and backstops, but they haven't yet, and based on the prevailing attitude amongst the major participants, it's unlikely they will anytime soon. The only real difference between crypto and banks as a payments system is whether or not you want to start from scratch and build up, or start with the existing morass and tear down. The latter is the safer option which many people prefer when it concerns their money
    - toenail 1y ago
      The idea that I’d need anybody’s permission or a regulation to allow me to give my money to somebody else is the problem.
zaptheimpaler 1y ago
I just want to easily pull bank/card transactions into my budget app, and the glacial pace of open banking really annoys me. The pace in Canada has been just as slow, although we have Interac for direct person to person transfers already so I'm not sure how much the issue of direct payments applies there. It's really just f**ing ridiculous that some of the earliest and most important digital systems we have are allowed to wall in their data with no API access. Banks suck so goddamn hard and are allowed to operate without any real competition and don't innovate at all. They are the definition of regulatory capture.
- sieabahlpark 1y ago
  [dead]
- politician 1y ago
  > Banks suck so goddamn hard and are allowed to operate without any real competition and don't innovate at all. It's not really the banks' fault. They're all stuck leasing expensive information systems from entrenched third-party technology shops. They don't have software development dollars and they are extremely risk averse, to a paranoid degree. Thank the regulatory environment for that (state and federal). Companies like Moov.io are trying to crack open this space and provide the levels of integration we see in other industries. But it's really hard and slow.
  - neoecos 1y ago
    That's why Im really bullish on Column, a tech company with banking license
    - cedws 1y ago
      Isn’t that basically every neobank?
      - mousetree 1y ago
        They don’t have banking licenses, at least not in the US
BrenBarn 1y ago
> In the intervening years, that competition has arrived. The banks do not like it, and would prefer it if it went away. This is the conclusion of most articles about such topics. The conclusion is that we need less "knuckle-raps". Instead, a crippling sledgehammer blow to both kneecaps followed by a warning that the next will be to the skull (of the company, to be clear) unless the banks entirely capitulate, accept a massive reduction in profits and executive pay, and fully open their entire systems.
Animats 1y ago
Remember the Synapse/Yotta/Evolve collapse.[1] That is what happens when a fintech startup has authority to manipulate customer bank accounts but is not financially strong enough to handle problems. [1] https://apnews.com/article/synapse-evolve-bank-fintech-accounts-frozen-07ecb45f807a8114cac7438e7a66b512 https://apnews.com/article/synapse-evolve-bank-fintech-accou...
- omcnoe 1y ago
  To be clear, the Synapse case is not clearly a financial strength issue in the sense that they took risks with customer funds, but rather an extremely serious record keeping/accounting/auditing one. Synapse was supposed to be nothing more than a "dumb pipe" between customers, fintechs, and underlying traditional bank accounts.
  - Animats 1y ago
    That's the problem with those things. Who's responsible for plumbing leaks? A sizable fraction of what bank employees do involves error conditions and fraud. The happy path has been automated for decades. One of the big discoveries when PayPal started up was that they were not in the money transfer business. They were in the fraud prevention business.
- devman0 1y ago
  I would argue, the issue is that they had exclusive control over the customers bank accounts. I have no problem with fintech that integrates with existing accounts over the top. The issue is with fintechs that are not really banks, so they keep your money in a "program bank" where you are not the direct customer. You can't go to the program bank and say Fintech XYZ went belly up and I want my money, because you are not the banks direct customer (even though in some cases your name is legally on the account for FDIC insurance reasons). Open banking tech is way more about the former than the latter.
thrown-0825 1y ago
If only we could store financial data on a globally distributed immutable ledger with strong cryptographic guarantees.
gethly 1y ago
The entire banking industry is the most backwards, outdated and barely functioning sector in the whole world. I have no clue how we have not yet collapsed the financial system via some hack or basic data loss.
- blitzar 1y ago
  > I have no clue how we have not yet collapsed the financial system via some hack or basic data loss. Sometimes not moving fast and not breaking things has its advantages.
- elric 1y ago
  > I have no clue how we have not yet collapsed the financial system via some hack or basic data loss. Banks are pretty good at not losing data. They're also pretty good at layered security. I mean there's fraud and theft on all levels, but collapse-level events don't come from "a hack or basic data loss". They come from political incompetence and large scale economic events.
  - gethly 1y ago
    > I mean there's fraud and theft on all levels you are confusing payment card issuers and processors with banks
    - disgruntledphd2 1y ago
      Many/most banks are also issuing banks (which means that they issue V/MC cards to their users). And fundamentally credit and debit cards are a source of credit risk and fraud for those banks.
    - elric 1y ago
      I most certainly am not. But there's certainly fraud in those places too. There is all kinds of frauds within banking, from insider trading to cleverly hidden rounding errors being pocketed by software engineers, and everything in between.
  - 1y ago
AndrewDucker 1y ago
No mention of how open banking works outside of the US, where (in the UK) bank transfers are basically instantaneous and free, and I can happily retrieve my payments list to my budgeting app.
- rkomorn 1y ago
  > and I can happily retrieve my payments list to my budgeting app Is this a UK thing? I've been searching for something like Mint/Quicken in the EU and haven't found anything worthwhile because there doesn't seem to be a standard for budgeting apps to connect to banks.
  - gripfx 1y ago
    I use the GoCardless API to pull transactions and balances into a Google Sheet. They have pretty good coverage for UK and EU it looks like [1] [1] https://developer.gocardless.com/bank-account-data/overview#coverage https://developer.gocardless.com/bank-account-data/overview#...
  - erinnh 1y ago
    PSD2 is that standard. I personally use Finanzguru (for the German market, it supports many banks). Likely to be many others.
    - rkomorn 1y ago
      Seems like my bank started supporting it last year. Will check it out. Clearly, I must have been searching wrong!
  - AndrewDucker 1y ago
    A quick search shows this one is well regarded https://www.bilanceapp.com/ https://www.bilanceapp.com/
    - rkomorn 1y ago
      Interesting... in that it apparently has the exact same limitations as my bank's built-in finance tracking feature (including being mobile-only).
mightypirate 1y ago
with all the self-custody crypto cards available right now I completely stopped using bank accounts. Can easily pull the data from the ledger and automate payments as I wish
- Jommi 1y ago
  yup, MiCA makign euroepa nstablecoins akin to real money, so stables like monerium can be used just like if you used revolut and a card from revolut its crazy and its here today
blessedcavapoo1 1y ago
[dead]

155 points by smitop 1y ago

HN darling but ... thumbs down. Seemingly no insight. Long read (skipped most). IMHO largely valueless opine and supposition. I think we already know bankers bank, corporations can't innovate, and regulations are abused for protectionism.

theendisney 1y ago
I had a funny chat in the 90s with soneone in charge of a bank. The thing was, they wanted me to supply a business plan. I know how to write those but find it mysterious that they want me to write it for all completely unorriginal businesses. If one wants to start a shoe store one should simply investigate the demography and map the varous shoe stores nearby. The bank is in a position to do that cheaply for their entire service area. Innovation would be to put the opportunities in the window display. Their standard plan can have everything they look for. No need to complaint that the guy who hapoens to be good at baking bread forgot something. If the data checks out you can give much larger lones with more interest. If there are many holes in the coverage you sell someone a lone for a franchise. It was a funny chat because everything was impossible, even a bank director should not submit ideas.
- EGreg 1y ago
  Well of course. That’s how most gatekeepers act. Why does every employee in the US need to pay an accountant to file their corporate payroll taxes, when the corporation knows how much they paid and can just use THEIR accountant to report this same information? It would be standard across many employees. And in Europe that’s largely what’s done. But in USA this creates many “bullshit jobs”. The IRS just closed their free file under Trump admin, and even when they had it, you had no way to electronically submit business taxes, and even if you mailed those to the IRS (still allowed) some states have NO WAY for you to file taxes without an accountant! To open an LLC in NY you must announce it in a specific newspaper they tell you. And that newspaper charges $700. Same thing — they lobby to keep this going.
  - eadmund 1y ago
    > Why does every employee in the US need to pay an accountant to file their corporate payroll taxes, when the corporation knows how much they paid and can just use THEIR accountant to report this same information? How would my employer know how much money my savings, chequing and investment accounts make? I owe taxes on all of those as well as on my income. How would my employer know what interest I pay on my mortgage, how much I contribute to charity and my other deductible expenses? > some states have NO WAY for you to file taxes without an accountant Which ones?
  - lotsofpulp 1y ago
    >Why does every employee in the US need to pay an accountant to file their corporate payroll taxes, when the corporation knows how much they paid and can just use THEIR accountant to report this same information? You don't need an accountant, and employees do not pay "corporate payroll taxes", they usually just pay income tax to the federal government. And if you think tax liability is based solely on amount of pay received from an employer, then I think you must not have any experience with paying income taxes in the US. >The IRS just closed their free file under Trump admin Free Fillable Forms is still available for electronic submissions. What closed was the government provided alternative to guided tax preparation software like TurboTax. > some states have NO WAY for you to file taxes without an accountant! I doubt this. Please provide an example.
- Danieru 1y ago
  The business plan is not about the business plan. It's only even half about the business. Instead it is about the businessman making the pitch. If someone is good at baking bread that suggest they are qualified to to bake bread. Running a bakery is a super set of that skill. The business plan request is a fantastic method to give such a person a chance to show they have the right resources, enough experience, and reasonable expectations and strong commitment.
- omcnoe 1y ago
  The bank isn't so interested in whether it's a good idea to open a shoe store or not, but in whether you as the person asking for lending has the skillset to actually execute on that plan. Asking the person who wants lending to write the plan is the easiest way to check this.
EGreg 1y ago
HN anathema: crypto and blockchain — can and does trivially solve the issues Patrick writes about. You can easily make sure the account has enough money, without knowing whose account it is. Crypto is “buyer beware”. The traditional fintech system is “seller beware”. But crypto is programmable and in theory you could easily make use of arbitration, resolution of disputes, and periodic payouts etc. All without being forced into the bundle of services you don’t control, that banks saddle you with.
- ranger207 1y ago
  Crypto and blockchain by itself does not solve any of these problems. It's merely a payments system that happens to be on a computer natively. There's nothing technical preventing banks from getting together and making Open Banking a well-supported thing like they're supposed to be doing; it's all just code and contracts in the end. It's not that they can't, it's that they won't, and they won't for business and political reasons. Crypto is subject to the same pressures but doesn't have the same regulations to constrain their actions. Crypto's better ability to eg do international payments is not because of any technical reason but simply because they don't have the same regulations and inertia of the traditional banking system. While the traditional banking system has problems with its regulations making things too hard to do, many people prefer it to the easier to screw up wild west of crypto payments. Lots of people like the FDIC making sure their savings aren't wiped out if the bank lies on its balance sheet, or the ability to claw back money transfers if someone breaks into their account. Crypto could certainly provide those services and backstops, but they haven't yet, and based on the prevailing attitude amongst the major participants, it's unlikely they will anytime soon. The only real difference between crypto and banks as a payments system is whether or not you want to start from scratch and build up, or start with the existing morass and tear down. The latter is the safer option which many people prefer when it concerns their money
  - toenail 1y ago
    The idea that I’d need anybody’s permission or a regulation to allow me to give my money to somebody else is the problem.

zaptheimpaler 1y ago

I just want to easily pull bank/card transactions into my budget app, and the glacial pace of open banking really annoys me. The pace in Canada has been just as slow, although we have Interac for direct person to person transfers already so I'm not sure how much the issue of direct payments applies there. It's really just f**ing ridiculous that some of the earliest and most important digital systems we have are allowed to wall in their data with no API access. Banks suck so goddamn hard and are allowed to operate without any real competition and don't innovate at all. They are the definition of regulatory capture.

sieabahlpark 1y ago
[dead]
politician 1y ago
> Banks suck so goddamn hard and are allowed to operate without any real competition and don't innovate at all. It's not really the banks' fault. They're all stuck leasing expensive information systems from entrenched third-party technology shops. They don't have software development dollars and they are extremely risk averse, to a paranoid degree. Thank the regulatory environment for that (state and federal). Companies like Moov.io are trying to crack open this space and provide the levels of integration we see in other industries. But it's really hard and slow.
- neoecos 1y ago
  That's why Im really bullish on Column, a tech company with banking license
  - cedws 1y ago
    Isn’t that basically every neobank?
    - mousetree 1y ago
      They don’t have banking licenses, at least not in the US

BrenBarn 1y ago

> In the intervening years, that competition has arrived. The banks do not like it, and would prefer it if it went away. This is the conclusion of most articles about such topics. The conclusion is that we need less "knuckle-raps". Instead, a crippling sledgehammer blow to both kneecaps followed by a warning that the next will be to the skull (of the company, to be clear) unless the banks entirely capitulate, accept a massive reduction in profits and executive pay, and fully open their entire systems.

Animats 1y ago

Remember the Synapse/Yotta/Evolve collapse.[1] That is what happens when a fintech startup has authority to manipulate customer bank accounts but is not financially strong enough to handle problems. [1] https://apnews.com/article/synapse-evolve-bank-fintech-accounts-frozen-07ecb45f807a8114cac7438e7a66b512 https://apnews.com/article/synapse-evolve-bank-fintech-accou...

omcnoe 1y ago
To be clear, the Synapse case is not clearly a financial strength issue in the sense that they took risks with customer funds, but rather an extremely serious record keeping/accounting/auditing one. Synapse was supposed to be nothing more than a "dumb pipe" between customers, fintechs, and underlying traditional bank accounts.
- Animats 1y ago
  That's the problem with those things. Who's responsible for plumbing leaks? A sizable fraction of what bank employees do involves error conditions and fraud. The happy path has been automated for decades. One of the big discoveries when PayPal started up was that they were not in the money transfer business. They were in the fraud prevention business.
devman0 1y ago
I would argue, the issue is that they had exclusive control over the customers bank accounts. I have no problem with fintech that integrates with existing accounts over the top. The issue is with fintechs that are not really banks, so they keep your money in a "program bank" where you are not the direct customer. You can't go to the program bank and say Fintech XYZ went belly up and I want my money, because you are not the banks direct customer (even though in some cases your name is legally on the account for FDIC insurance reasons). Open banking tech is way more about the former than the latter.

thrown-0825 1y ago

If only we could store financial data on a globally distributed immutable ledger with strong cryptographic guarantees.

gethly 1y ago

The entire banking industry is the most backwards, outdated and barely functioning sector in the whole world. I have no clue how we have not yet collapsed the financial system via some hack or basic data loss.

blitzar 1y ago
> I have no clue how we have not yet collapsed the financial system via some hack or basic data loss. Sometimes not moving fast and not breaking things has its advantages.
elric 1y ago
> I have no clue how we have not yet collapsed the financial system via some hack or basic data loss. Banks are pretty good at not losing data. They're also pretty good at layered security. I mean there's fraud and theft on all levels, but collapse-level events don't come from "a hack or basic data loss". They come from political incompetence and large scale economic events.
- gethly 1y ago
  > I mean there's fraud and theft on all levels you are confusing payment card issuers and processors with banks
  - disgruntledphd2 1y ago
    Many/most banks are also issuing banks (which means that they issue V/MC cards to their users). And fundamentally credit and debit cards are a source of credit risk and fraud for those banks.
  - elric 1y ago
    I most certainly am not. But there's certainly fraud in those places too. There is all kinds of frauds within banking, from insider trading to cleverly hidden rounding errors being pocketed by software engineers, and everything in between.
- 1y ago

AndrewDucker 1y ago

No mention of how open banking works outside of the US, where (in the UK) bank transfers are basically instantaneous and free, and I can happily retrieve my payments list to my budgeting app.

rkomorn 1y ago
> and I can happily retrieve my payments list to my budgeting app Is this a UK thing? I've been searching for something like Mint/Quicken in the EU and haven't found anything worthwhile because there doesn't seem to be a standard for budgeting apps to connect to banks.
- gripfx 1y ago
  I use the GoCardless API to pull transactions and balances into a Google Sheet. They have pretty good coverage for UK and EU it looks like [1] [1] https://developer.gocardless.com/bank-account-data/overview#coverage https://developer.gocardless.com/bank-account-data/overview#...
- erinnh 1y ago
  PSD2 is that standard. I personally use Finanzguru (for the German market, it supports many banks). Likely to be many others.
  - rkomorn 1y ago
    Seems like my bank started supporting it last year. Will check it out. Clearly, I must have been searching wrong!
- AndrewDucker 1y ago
  A quick search shows this one is well regarded https://www.bilanceapp.com/ https://www.bilanceapp.com/
  - rkomorn 1y ago
    Interesting... in that it apparently has the exact same limitations as my bank's built-in finance tracking feature (including being mobile-only).

mightypirate 1y ago

with all the self-custody crypto cards available right now I completely stopped using bank accounts. Can easily pull the data from the ledger and automate payments as I wish

Jommi 1y ago
yup, MiCA makign euroepa nstablecoins akin to real money, so stables like monerium can be used just like if you used revolut and a card from revolut its crazy and its here today

blessedcavapoo1 1y ago

[dead]