Blue oceans for banks(docs.google.com) |
Blue oceans for banks(docs.google.com) |
https://www.simple.com/company/the-next-chapter
The OP is a short ambitious document written by two guys who think they can do better. They think they can build a new kind of "bank for tourists." So far, they have a landing page and a mobile app: https://www.wrinq.com/ ...They will need a lot of luck.
Foreign transaction costs are not "prohibitive" expensive and there are CC in the US with no foreign transaction fees. You can use transferwise or WU in the worst case (just wired a buddy who is broke US$ 300 online). Social network and payments? Use Wechat!
There are three major problems that they won't be able to solve.
1. KYC regulations
2. Fraud. The financial industry makes it more difficult and more difficult to access your own money (e.g. require a receive text message to wire money. Good luck with that abroad)
3. "in multiple currencies and fast unrestricted exchange of funds within the internal banking network"
This is not a problem as long as your stay within ONE country. Use Wechat in China, use M-Pesa in Kenya etc. It becomes a problem when you do it internationally because many countries are heavily regulated and afraid that capital leaves the country. Have you made, as an average person, international transactions with China? India? Sri Lanka? Ethiopia? Good luck buddy!
In fact, even getting cash at the ATM abroad becomes more tricky. Recently I got into the habit of just carrying cash for all my travels after I run nearly out of cash twice (Ethiopia and India). What do I carry? Euros! They did not want my dollars in Ethiopia because they were "not the latest series" (remember point 2?)
If you don't see any new idea then can you at least see a concept that has been proven already by revolut. If so can you see a possibility that this concept can be taken further to include other businesses and banks? If you do can you can you imagine a scenario where ideas we suggest might be probable?
And if we are able to overcome the challenges you put forth would you say that this idea is a winner?
Further we're not building a new bank. We're proposing to use the existing systems available, in any international bank today ,in a new way.
Simple was a challenger. We want to collaborate. Hacker news might just be the rabbit's foot!
https://docs.google.com/document/d/1cu7vl4GiQHg8Tqqt_nGj7JOT...
- The low hanging fruits in corporate banking services (https://docs.google.com/document/d/11SRXfuC0-L5iGlHypnviI9H5...)
- A scalable banking proxy (https://docs.google.com/document/d/11SRXfuC0-L5iGlHypnviI9H5...)
Your point about foreign transaction fees is also correct in part. There are many layers of fees in a foreign transaction, many portions of which are directly controllable by the parent bank as is already proven by services like Revolut and centtrip.
Not much can be done about the remaining charges but even the savings that can be done with the help of a parent bank are very substantial and within the bounds of regulation.
Tether providing stable value for settlement
I think people wouldn't come up with ideas like wrinq if they were aware of existing solutions to build on top of
And I say that as a consultant who has seen many potential founders scrap their idea, after I sign their NDA and they finally tell me about their supposedly original idea only for me to tell them the existing solutions
It's fine to be unoriginal but they scrap their idea.
Doesn't know anything about retail banking if you are reusing that term
Many major companies have their own banks and even insurances. An insurance is an easily available tax shelter.
It's true that most new work and new ideas won't amount to anything. But those that will, almost never look like they will when they're incipient. So if we don't want to trample on new things of great potential value, we have to adjust our response to all new things, including the ones that seem lame. It takes a certain discipline to practice that suspension of judgment, and we're hoping to cultivate that quality here.
OK: To expand. FinTech startups seem particularly prone to some form of the “the bits of a business I can observe from the outside are obviously shit, so all I have to do is re-create better versions of those & the customers will flock to me in droves & I can take over the world” fallacy.
Be as positive as you like, but any proposal that doesn’t at least nod to the wider issues is going to make me instantly suspicious that the founders don’t actually understand the banking system as is, or the reasons why it’s structured that way.
Here’s a small list of issues that I’d like to see covered in at least some fashion in a FinTech proposal, but are often glossed over or completely omitted. I’m sure others could think of more.
* Banking is heavily regulated whilst at the same time being the target of some of the most persistent and talented fraudsters on the planet. (Paypal burnt through, what, a $billion or so in fraud whilst trying to establish themselves?) You want to be a global banking solution? You’d better have a damn good idea how you’re going to deal with fraud.
* Did I mention that banking is heavily regulated? Your product brief had better demonstrate how you fit within the existing regulations. Failure to understand this will be terminal for your company (Where by terminal I mean: the execs risk going to prison and / or large fines. The SEC does not mess about.) Move fast and break things is not a valid strategy when ordinary people’s money is at stake.
* US FinTech startups are particularly prone to thinking that the rest of the world has a banking system as broken as the US one. Nothing wrong with trying to fix the US system but if you say you want a billion customers? You’re going to have to take a decent chunk out of the world’s population, which in many cases already has a perfectly decent banking system: Fast same day payments, very low fee international transfers, no-load payments in foreign countries, the works. Don’t think that the rest of the world works like the US.
* Every transaction is two sided - banks are middlemen - so your wonderful product had better appeal to both sides if it’s going to be successful. It’s pretty much doomed to fail if it only benefits one party in a transaction. If your plan is full of details about how wonderful your product is for people making purchases but very light on anything that would appeal to vendors (or vice versa) then I’m going to think that you don’t understand what makes payment systems successful.
* Banking is as much about reputation and credit management as it is about the boring details of money transfer. What allows me to buy things at a distance without cash is that my bank stands behind me and tells the vendor that my credit is good. If your bank is going to do that for me, then they have to have the standing to do that with the vendors I wish to purchase from. Can your FinTech payment system product do this? If not, it’s going to fail.
etc etc.
Having said that you raise many important points. Let me try to respond to them
>Where does the assumption come from that banks aren't aware of this market.
I'll concede that they probably are aware of this market. Now we want to build a service that caters to this market. And in the process make a profit for everyone involved. We know that there are businesses like revolut that have proven a part of this concept. We want to take it further.
If the market has been observed, services have been shown to be deficient and the concept proposed has been shown to be working then it should be smooth sailing.
>"not all business models try to maximize "eyeballs", or customers and that some attempt simply to maximixe revenue or profit"
There may be some business that don't try to maximize eyeballs or customers. But banks are not one of them for sure. If you look at the history of original credit cards they were made popular by
>"mass mailing of unsolicited credit cards (actual working cards, not mere applications) to a large population.[1]
It has also been my personal observation that banks put on large advertisements to attract new customers based on attributes like interest rates and after a certain period of time these attributes get constant across banks. We are suggesting that it could be beneficial in the long run to look for a different set of customers.
>And how on earth does one compare near lawlessness of Facebook with the most heavily regulated sector of banking
But we didn't suggest any lawlessness!
Very interesting. Would love to have more details!
May I also ask if Virgin money has services that integrate with their other business, like say virgin airlines, as well?
Banking, proper, retail custmers, includes merchant banks, investment banks, money markets, M&A, public markets debt and equity, and such. The piece seemed to boil it down to retail banking.
It's also true that banking services are entirely different from facebook. But the goals are similar.
I guess one way to restate my opinion in a couple of lines would be
There are markets and customers that are not immediately in the operational radius of a local bank. Any bank that can create offerings that would appeal to such markets would stand to gain profit.
Also to flip the discussion we could ask if facebook were to create a bank how would they do it?
Out of curiosity by just do you mean today?
They use Barclays as their backend but is anything of that visible to their customers?
Barclays has been known to help startups by lending them their (global) infrastructure in the UK. Another Example is Dopay where Egyptian Barclays ATMs have been lent out.
The Bank of England is moving towards allowing non banks to participate in the payments system by 2020, its supposedly blockchain secured so it goes a notch above what a sole bank/firm could do. Revolut could theoretically switch from Barclays then.
You can think of revolut as a front end for barclays client pool account. This is a very simplistic explanation but what I'm trying to emphasize here is that the money revolut manages is effectively with Barclays.
So the idea of having Barclays is not to get traction or to have their own participation method later but to have the muscle of a bank that can handle large scale international payments.
There are other big banks who don't have something like revolut. So our solution can be a good proposition for them (Not saying that we don't have ideas for any new features. We do, but we've been caught off guard by the new announcement. It'll take a few more days to make it's way to the pitch)
>"Barclays has been known to help startups by lending them their (global) infrastructure in the UK"
Yes, but why? Barclays profits with every customer that revolut brings/ will bring. Other banks would want to profit in a similar way.
I didn't know about BOE but I don't think that switching banking partners after about 5 years of operation is going to be that easy... Not sure could be wrong.
Actually they hope the startup does well so they can buy them later. Revolut's cost of acquiring a user is far less than Barclays (<£10 vs £300+).
Barclay's deal isn't free, they take equity in exchange for letting startups using their infrastructure, it's not that expensive considering what they give though.
I think I know what you're getting at, at replacing the Correspondent bank system. There's another one, Transferwise, that seems to be getting transaction where Banks in other countries use it internally to avoid correspondent banks (transferwise often matches transfers to avoid transfers).
The BoE's 2020 system isn't for an ordinary firm to replace a banking partner. It's to join the payment network and have an account backed by the BoE/blockchain without it being at a designated high street bank. It wont be easy to use I guess, but it would be compelling enough for a Fintech company to use it.
I can see alot of value with the service you're describing, I don't think the level of value would be high out of countries which have high legislative requirements/forex controls. I had a similar idea a few years ago and my base assumptions were incorrect regarding people's needs for my service.