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The 'Neo-Banks' Are Finally Having Their Moment (nytimes.com) 121

Posted by msmash from the enough-already,-my-bank dept.
After the financial crisis 10 years ago, unhappy customers were expected to flee the megabanks for smaller competitors. It didn't happen. And the big banks became even more entrenched. Now another wave of alternative banks are at it again, and they say they've learned from the mistakes of the upstart banks that tried -- and failed -- before them. The New York Times: Chime, the biggest new name to pop up, has opened two million fee-free online checking accounts and is adding more customers each month than Wells Fargo or Citibank. That has inspired a crop of newer start-ups, like Empower, which started its first fee-free online checking accounts, with lots of digital bells and whistles, in October. Venture capitalists are pouring money into American start-ups that are offering basic banking services -- known as neo-banks or challenger banks. In 2018 so far, American neo-banks have gotten four times as much funding as they did last year, and 10 times as much funding as they did in 2015, according to data from CB Insights.

Big players from outside the consumer banking industry, like Square and Goldman Sachs, are also moving in. "In consumer banking, you have what is one of the largest industries in the United States, in terms of profits, and at the same time one of the least disrupted industries, and the most unpopular with consumers," said Andrei Cherny, the founder of Aspiration, a neo-bank that has attracted nearly a million customers. "Those three things create a perfect storm for disruption." The persistent unpopularity of big banks has been a boon to the newcomers. And they are helped by a new attitude among financial regulators who have grown more comfortable with online banking and young customers who have no hesitation about cashing a check or sending money on a phone.
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The 'Neo-Banks' Are Finally Having Their Moment More

The 'Neo-Banks' Are Finally Having Their Moment

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  • Cash $$$ (Score:3)

    by rfengr ( 910026 ) on Wednesday November 21, 2018 @12:37PM (#57680576)
    How do you withdraw a decent amount of cash from these virtual banks? An ATM is typically $300/day.

    • Re:Cash $$$ (Score:4, Funny)

      by puddingebola ( 2036796 ) on Wednesday November 21, 2018 @12:59PM (#57680710) Journal
      Cash? Why would you need your cash? This is a "neo-bank." Nobody needs cash. You give the "neo-bank" your money, and then you experience the simulated bank. If you find yourself in an emergency where you need cash, you just create synergy.

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      You keep your old bank account open, transfer the money into it and then go to the counter to withdraw.

      Seriously though, when was the last time you needed to withdraw a large amount of cash? These days the electronic payment is pretty much instant.

  • I trust my credit unions (Score:5, Informative)

    by DogDude ( 805747 ) on Wednesday November 21, 2018 @12:39PM (#57680580)
    I don't trust (or use) commercial banks. Every one that I've tried has been garbage.

    I have no reason to trust these start-ups, which I'm sure will be sold as soon as they can to big banks and are selling their "customers"' data all the while.

    I'll stick with my trusty, cheap, and very effective local credit unions, thank you.

    • Re: (Score:3, Interesting)

      by olsmeister ( 1488789 )
      Opposite here. I have accounts at both a local CU and a local bank. The CU is OK, but the bank is much better. The tellers know me by name (no idea how they do that, I'm only in there once a month or so) and they have free soda, popcorn, and sometimes hot dogs. They pay me interest on my checking account (CU does not) and I have a free safe deposit box at the bank as well. It's really no contest. The only reason I keep the CU account is because I've had it for 30 years.

      • Re: (Score:1)

        by Anonymous Coward

        My experience matched yours completely.

        Then I stopped eating the hotdogs.

        Then the mind control drugs wore off.

        And then I realized the Matrix was using me as a battery and a source of cash.

      • Re: (Score:2)

        by shess ( 31691 )

        Opposite here. I have accounts at both a local CU and a local bank. The CU is OK, but the bank is much better. The tellers know me by name (no idea how they do that, I'm only in there once a month or so) and they have free soda, popcorn, and sometimes hot dogs. They pay me interest on my checking account (CU does not) and I have a free safe deposit box at the bank as well. It's really no contest. The only reason I keep the CU account is because I've had it for 30 years.

        Wow. My local banks have interest-bearing checking accounts. They pay up to .05% interest, and charge like $18/mo for the privilege. My credit union charges $0/month and pays %.65 interest on checking, and 1.9% on savings (which has transaction restrictions, but is a great backstop for my checking account). When I audited things, the numbers varied, but the banks varied between conning you out of your money versus outright stealing it, and the credit unions varied from weak to reasonably competitive wit

      • The tellers know me by name

        What's a teller? According to Wikipedia it's an employee at a branch that deals with customers. I went down the Wikipedia spiral trying to find out what a bank branch was.

        Do you guy still do this? I think vaguely remember talking to a "teller" back in the early 90s when my parents took me to a bank to open an account. I just looked at my own bank's website. Apparently they have branches and tellers and they charge you $5 if you need to talk to them. I don't know why you would ever talk to them but there you

    • You can also trust the post office. Expect more people like these to take pot shots against it [americanbanker.com].

      • The post office has nothing to do with banking. Why not make it so you can pick up your UPS packages at the local porno shop? Or put knitting supplies in fishing tackle stores?

        Honestly as bad as banks are, having a US government bank sounds even worse.

        • The post office has nothing to do with banking.

          Oh my sweet summer child, didn't you read the linked article which mentions how the Post Office offered savings accounts from 1911 to 1967? But what astounds me is that you didn't already know that. Know your history!

          https://en.wikipedia.org/wiki/... [wikipedia.org]

          Not only that, but in many countries, the Post Offices DO offer banking services.

          So if the USPO was to offer bank services, they'd be returning to their roots. Though I think as part of that they should offer e-mail accounts and SMIME e-mail certs.

          Even in the U

          • Sounds like it was a dumb idea and they stopped doing it. Much like other American attitudes that were in place from 1911 until the 1960s.

            • They stopped doing it because demand dropped. Demand dropped because the post office wasn't allowed to offer OTHER banking services. For example, the interstate highway system and post WW2 affluence meant more travel, which meant that personal checks became useful for the masses. Also mail-order retailers began using no-cash policies and stopping cash-on-delivery, again making personal checks more useful when filling out a Sears/Montgomery Ward/JC Penney order form.

              Also many blue collar people took advan

              • Have you BEEN to a US post office? They have the customer service skills of the Unabomber.

                • Why yes, I have been to post offices, never had bad service. Do you go in ranting about collectivists or big government or something? Or did you make up a strawman to promote your usual randroid/alt-right/all-government-is-evil-collectivism rantings.

    • Plus credit unions are "Buying locally", which helps your immediate area far more than shipping the cash away to somewhere across the country/world.

    • Re: (Score:3)

      by chill ( 34294 )

      You're lumping in National Banks with Community Banks, and they are very different. You might want to take a look at a Community bank in addition to your Credit Union.

      https://ilsr.org/top-5-reasons-choose-community-bank-or-credit-union/ [ilsr.org]

    • Ditto here. They call me when they spot likely fraud on a card, and return the money instantly. If I need a new card, I take a 5 min walk from work to the local branch, and they print one on the spot. Their rates are pretty much the same as the banks, and they have no fees for just about anything.

      I've had mixed CU experiences - usually the smaller they are, the more they struggle. Once they get big enough, they tend to have all the bells and whistles that the bigger banks have, with very customer friendly p

    • I dunno. I've heard that LCUs are better, but looking at their fees and services, etc. it seems that they are on par with the big commcercial banks. Sometimes even worse. Maybe my LCU sucks. Care to put forth some numbers?

      • Re: (Score:2)

        by DogDude ( 805747 )
        Every credit union is different. I'm a member of four local ones and I move 8 figures worth of money annually through them in one way or another. They have very low fees on regular banking services, great interest rates for borrowing, and they pay a decent amount on savings/money market. One of them is staffed on the phone 24/7, and have tellers available in branches 7:00 AM-7:00 PM 7 days a week. That, and they're non-profits, so I trust them not to try to fuck me over.
  • Revolut and N26 are geting popularity here in Europe because of ungreedy exchange rates, low/no fees and nice phone apps. Waiting on them to open up investing via app since we don't have robinhood in europe.

  • I've twice lived in the USA (Score:5, Informative)

    by FeelGood314 ( 2516288 ) on Wednesday November 21, 2018 @12:58PM (#57680698)
    The banks in the USA are terrible. They are far worse than any other industrialized country and often banking is easier in third world countries. American's also tend to use cash and checks more than everyone else. My kids don't even carry wallets anymore, I doubt you could do that in the USA. The banks just aren't motivated to be convenient like that.

    Also I'm a white male which makes using financial services much easier. There is a certain class and race rigidity in the USA and the financial system is a big part of it.

    • Re: (Score:3)

      by AmiMoJo ( 196126 )

      "Bank" is actually from the Latin "bastardus". True fact.

    • Eh?

      My kids don't even carry wallets anymore, I doubt you could do that in the USA.

      Not sure what you are basing that on ... if you wanted to, you could likely go cashless as easily as anyplace else.

      Also I'm a white male which makes using financial services much easier. There is a certain class and race rigidity in the USA and the financial system is a big part of it.

      relax their standards whenever non-white is in the equation.

      • Re:I've twice lived in the USA (Score:4, Insightful)

        by cascadingstylesheet ( 140919 ) on Wednesday November 21, 2018 @01:44PM (#57680982) Journal

        Garr, tag soup ... trying again.

        Eh?

        My kids don't even carry wallets anymore, I doubt you could do that in the USA.

        Not sure what you are basing that on ... if you wanted to, you could likely go cashless as easily as anyplace else.

        Also I'm a white male which makes using financial services much easier. There is a certain class and race rigidity in the USA and the financial system is a big part of it.

        What are you talking about? If anything, banks relax their standards whenever non-white is in the equation.

    • You have to remember, we are a big country. That definitely has an influence on things, our infrastructure is huge. I looked up some numbers, and in 2017 there were 78,774 branches of FDIC-insured commercial banks in the US. So it takes a while to implement technologies, and when things change fast, sometimes it's just easier to keep using things that work. Now if you are in a big city, you'll see more things like digital payment technology. But if something works fine, why change it?

      Having said that,

    • I don't know what USA you've been to, but the one I've seen is dominated by debt ... err I mean "credit" cards.

      And on what planet is using actual cash instead of imaginary debt for the low low price of total totalitarian surveillance of your finances a good thing?

      In Germany we have a saying: "Nur Bares ist Wahres." (Loosely translated: Only cash is true/real.)

      Here, you can't even use cards at many places. And the majority of us make sure you never will.

      I'm also certain, that the only reason we're using fiat

    • They are far worse than any other industrialized country

      How could possibly come to a reasonable analysis on that? Do you know how many industrialized countries there are? You didn't say "worse than most industrialized countries." You didn't say, "Worse than my country" or "worse than other countries I've tried," you said "worse than any other industrialized country." This sort of fuzzy language makes it seem like you are also a fuzzy thinker, and it makes it hard to trust your opinion.

      Furthermore your criticism of American banks is that "they make you carry a

    • My kids don't even carry wallets anymore

      Soon you'll be able to get your foreskin implanted and just pay for things by "whipping it out" and most of us 'dumb Yanks' won't even be able to do participate.

    • American's also tend to use cash and checks more than everyone else. My kids don't even carry wallets anymore, I doubt you could do that in the USA.

      That's odd.

      Why don't you like cash?

      I generally hit the ATM weekly or so, get a few hundred dollars out and my casual, weekly expenses are paid for out of that...it gives a a very solid, real feeling on what all I'm spending my money on that week.

      I have credit cards for things, large purchases, some online purchases sure....but I actually prefer to use cash w

    • Re: (Score:2)

      by jonwil ( 467024 )

      Here in Australia I was able to walk into a branch of the Bank of Queensland (the bank I currently bank with) and open an account and all I needed was a $1 coin and sufficient ID. In the years I have had that account, I have paid a grand total of $0 in monthly fees and $0 in normal transaction fees.

      The only fees I have paid in that time are for foreign online purchases and in a few cases fees for taking money of an ATM that charged fees (something I only do when one of the thousands of fee-free ATMs I get a

  • People tried to exit the moribund US banking system after the 2008 crash. Banks responded with legislation [wikipedia.org] to prevent this and drive customers back. Face it. We live behind a financial Iron Curtain. If they could justify shooting you for attempting to exit, they would.

    • Re: (Score:2)

      by DogDude ( 805747 )
      What are you talking about? "Exiting the US banking system"? What does that even mean?

      • Re: (Score:2)

        by PPH ( 736903 )

        It means banking with a foreign bank. Like ING, Deutsche Bank, Toronto Dominion, etc. It's what a lot of businesses did when the US banking system seized up in 2008. Until the US threatened to audit any foreign bank with an American customer until they screamed and cried 'Uncle'.

        • Re: (Score:2)

          by WoTG ( 610710 )

          Not sure how foreign TD is for Americans - they have more branches in the US than Canada now! Not sure how metrics other than branch counts compare...

  • It's a trick! (Score:5, Informative)

    by Thelasko ( 1196535 ) on Wednesday November 21, 2018 @01:37PM (#57680952) Journal
    Marcus (Goldman Sachs) and Empower (J.P. Morgan) are really just large megabanks in disguise. Marketing at its finest!

    • Re: (Score:2)

      by SeaFox ( 739806 )

      Marcus (Goldman Sachs) and Empower (J.P. Morgan) are really just large megabanks in disguise. Marketing at its finest!

      Marcus:

      - In Google Search results "Marcus by Goldman Sachs"
      - On the home page [marcus.com] right under the name: "by Goldman Sachs"
      - Security Cert indicator on Firefox before the URL: "Goldman Sachs Bank USA (US)"

      I don't see any attempt at deception there.

  • I don't know whether my thoughts apply here since I live in Switzerland but...

    The two primary things I'd want is the ability to pay normal bills with my credit card so I probably wouldn't even need a bank account and would collect frequent flyer miles on top of it :D.

    On a more serious note, I'd love it if I could use the principle of compounded interest FOR me instead of having it wielded against me for once. I'd like to be able to pay a fixed amont of money to the bank on my mortgage each month. The bank t

    • I'd like to be able to pay a fixed amont of money to the bank on my mortgage each month. The bank takes what it's due for interest and the rest goes to amortization.

      Isn't this what a mortgage payment is? At least in the US. It's why most people are underwater on their mortgage until like year 5 or 10... cause at the beginning 90% of your payment is interest, and it slowly decreases.

      That said, 1.2% is pretty darn good. Heck, you can probably find a safe investment that pays more than that.

      You save easily

  • I have accounts at both a major, nation-wide credit union and a not-so-large regional bank. I pay NO fees to either financial institution.

    Most of my "banking" is with the credit union, including my credit card. Through the Co-Op Network of credit unions, I can get cash without any fee from ATMs at most other credit unions as well as at a local drug store and a nearby convenience grocery. I can actually go into some credit unions where I do not have an account and make a deposit to the credit union where

  • I "moved my money" out of big banks (BOA to be specific) and just use a credit union. Better service, better rates, lower fees.

  • When ING Direct first came out years ago I jumped on board. Even back then I didn't ever have a need to go into a brick and mortar bank, didn't do a ton of ATM withdrawls.. More importantly they offered a savings rate that was almost 2% over the going rate at the banks and CU's.

    However that higher rate narrowed over time to be about equal and for some special promotion I jumped ship to one of the mega banks. I will say this, the big banks do a very good job with the apps and online stuff now. Checking

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