My wife works in banking, for a small local bank. The regulations are heavily skewed against smaller banks. Regulations around consumer mortgages seem to be designed to keep smaller banks out. Unless you have the resources to engage in sizeable software projects, you will have to write your own software, spend a lot of money on software licensing, or engage in a lot of manual work while risking draconian penalties for little mistakes.
So regulatory capture doesn't just mean rigging the game for banks. It's only the large corporations that do the rigging and gain the benefit.
Tech needs to figure out how to combine the power of small community banks. Small community banks can only survive through having superior local intelligence. That superior local intelligence is worth a heck of a lot in aggregate.
As I understand it, it doesn't matter if they are Chase, or BECU - most banks don't actually own any of the mortgages they issue.
The problem in 2008 was the fraud, the irrational exuberance, and really dumb investments by the investment branches of a few investment banks. The retail arm of, say, Wells Fargo, which issued a whole bunch of shitty mortgages was fine.
Whether or not you think that investment branches of banks deserve to be bailed out is an exercise for the reader.
Not being funny, but Guiliani forced the whole mortgage banking business into insolvency to make a point that some still think was Vendetta. Whatever the case, Guiliani forced a vast capital market to halt, for no reason I've ever learned, and handed a four trillion dollar bill to the taxpayer, for kicks. No wonder Trump likes his advice.
I'm not sure tech companies really want the core banking business, which is to lend money (taking on credit risk in the process) funded by deposits.
I can imagine Amazon doing it for smaller consumer purchases as they know their customers well. But who will make loans to SMEs and larger retail loans? Google and Apple? I doubt it.
Eventually interest rates will rise and then bad loans will increase, and tech companies will start to wonder if that's really the business they want to be in (like GE has been "wondering" for many years now).
And then there's the regulatory aspect. Do tech companies really want to be regulated as banks? I get the impression that they have daily run-ins with all sorts of regulators already and they're running scared.
Also presumably Alibaba and Tencent are earning quite a bit off their payments/banking and customers love it because they dont have to carry cash and do all the other steps etc. (talked to Chinese people about it).
http://money.cnn.com/2017/02/22/investing/atm-overdraft-fees...
And check out page 38 of BoA's annual report: http://media.corporate-ir.net/media_files/IROL/71/71595/BOAM...
Interest income was $44.7 billion, non interest income (aka fees, trading, and services) was 42.6 billion.
Also, most of the other segments are not exactly what I imagine tech companies will want to do either. In the case of BoA that includes the entire business of the former Merrill Lynch.
Are you sure it's that? Or is it that the apps don't want to have the responsibility of safeguarding people's money? Cause really, payments and money are things where you really do not want to "move fast and break things".
The most they could do is be a fancy wrapper around the bank's own software.
nordstrom, for example, is/owns a bank (until recently, it seems it’s been sold to charles schwab) but that’s because they got their charter in the 90’s before the regulatory burden became prohibitive (and was grandfathered in).
so i’m not sure tech companies can easily verticalize into banking.
A lot of places seem to support apple pay, but it's much less convenient than contactless (obviously some people disagree).
The massive centralization of our life is a huge problem.
Like we said "don't give everything to facebook" 10 years ago and people only wake up now, I wish people realized it's not about a particular brand. It's a general advice.
The worst part is that the power you give to them is invisible, so it doesn't seem that much. It feels harmless. But the potential for controlling ones life is huge.
I prefer Apple Pay over contactless as you can often go over the £30 limit of contactless. Eg I’ve spent £80+ at Waitrose and paid using Apple Pay. Plus it is more secure- you must authenticate to use it- and that added security doesn’t take long at all (under 1 second to Touch ID). I’ve got 3 cards (two debit, one credit) linked to Apple Pay.
I only have one contactless card, which is just to replace my Oyster card for tube/public transport travel, and that’s only because it’s quicker to pay with when going through the gates. I explicitly called the banks and told them to send me non-contactless versions of all my other cards.
Oh, and Apple Pay doesn’t suffer from card clash. Which is one of the other reasons why I only have one contactless card in my wallet.
So kind of agreeing with you - Apple Pay is great because then I don’t need to take my card (whereas I’ll always take my phone) and it has added security of Face Recognition.
However, the poor adoption (ie, all those places that don’t have contactless, don’t take cards, money transfers to friends, parking meters....). Contactless vs ApplePay is 50:50.
Plus, if my card is stolen, it can’t be abused on multiple cheap contactless purchases. Sure the bank will refund, but it’s still a pain of a process to go through, especially if the bank pushes back at all.
>it has consumer banks shaking in their boots, because there's no way they can outcompete those companies in tech. So instead they focus on regulatory capture
That's why COF is doing the whole "we're a tech company that also happens to be a bank" spiel. They are doing their best to back that up, as well. Lots of modern practices and of course they're all in on Cloud.
Google and Apple don't have to (and the banks won't get to) compete on tech if they enter the space. They'll compete on their ability to vertically integrate. Good news for google and apple, they're already in every pocket.
The reason the banks are scared is not because "banks" are not involved. They're scared because these apps have successfully vertically integrated to become banks. This is the logical next step for Apple / Google Pay and I'm sure it has consumer banks shaking in their boots, because there's no way they can outcompete those companies in tech. So instead they focus on regulatory capture and making it as difficult as possible for tech companies to play in their sandbox without banker supervision.
One only needs to look at the adoption rate of Apple Pay outside the US to see this system at work. In parts of Europe and the UK it's extremely popular because the banking systems have much friendlier regulations and fewer integration points. In the US the uptake has been slow because the integration is so cumbersome and the banks / payment networks control the entire cycle from point-of-sale to deposit.