For now, banks continue to profit from crowdfunding. They get a percentage of each credit card transaction.
However, they could be in serious trouble if an alternative payment system becomes popular. The stage is set - NFC and Bitcoin are growing in popularity, and the federal government recently began allowing merchants to charge a credit card fee.
If a taco cost $1.50 with my smartphone, or $1.75 with my credit card, I know how I'd pay.
They already force retailers to not give discounts for using cash. If they've figured out how to make that legal, why do you think BTC would be any different?
What we really need is for the justice department* to explicitly include the goal of making markets competitive in its short list of (un)official objectives.
* Or any branch of government. I mention the judicial because I think it is the branch least susceptible to bribery. Since competitive markets are bad for business, that makes it the most likely candidate to promote this kind of change.
> They already force retailers to not give discounts for using cash.
It's been illegal to prohibit stores from offering cash discounts since 2010; those contract terms are no longer enforceable. That was part of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
> They already force retailers to not give discounts for using cash.
The contracts actually say that merchants cannot add a surcharge for paying with a credit card. It's still okay to give a 3% discount off the final sale price for paying cash, or a 10% discount, or whatever they feel like. As far as I know these contracts are intended to mirror the laws about cash: you can't ask for 3% more because somebody wants to pay with cash, since cash is legal tender.
Not true since January. Part of a class-action settlement with Visa and MasterCard allows merchants to add a surcharge of up to 4% for paying with credit cards. The Dodd-Frank bill in 2010 banned prohibitions on the other terminology for the same thing -- cash discount. Cash discounts, credit surcharges, and minimums to pay with credit as low as $10 are all currently legal, and old merchant account agreement terms that prohibited them are void or unenforceable.
I suspect that's more or a contractual thing than a legal thing. I know gas stations around South Florida are now advertising cash and credit prices (so my thought is---the gas companies have enough pull to get favorable terms from the credit card companies).
To date it has been contractual. However, as a result of an antitrust lawsuit, Visa and Mastercard changed the provisions that ban merchants from charging a credit card surcharge. But states are now trying to bad adding those surcharges: http://www.cnbc.com/id/100485094.
Of course. I'm implicitly claiming that this kind of contractual requirement should be illegal since it's blatantly anticompetitive (my opinion, not the court's, naturally).
Bitcoin has no real advantage over credit cards, assuming the bitcoin processor (and there will be a middleman - not everyone is going to run a digital wallet) offers the same level of service. Credit cards cost a lot, because of fraud protection.
Now, maybe the banks are getting fat and lazy, and some new entrants will stir things up a bit. A secure token (maybe an app) could cut the costs of fraud protection, but I can't see how bitcoin can work better. Sure, you can have a 20 character password on you bitcoin collection. But there's no reason why banks couldn't give consumers the option of doing the same (a 20 character pin on a app, which validates transactions), if there was much demand for it.
There is no concept of chargebacks with bitcoin, so transaction costs can be kept lower. As the industry matures, I predict fraud rates in line with debit cards/ACH transfers.
Do note that to do expedient bitcoin transactions you need to offer a tip for accepting your transaction on some mining node to start getting confirmations quickly. If you don't offer a tip it can take upwards of an hour for some idle miner to pick your transaction up and start confirming it.
>and the federal government recently began allowing merchants to charge a credit card fee. If a taco cost $1.50 with my smartphone, or $1.75 with my credit card, I know how I'd pay.
And I know how the law would be changed in a moment's notice, if the banks found this scheme looses them money.
The easiest way for banks to deal with this disruptive threat is, of course, to make it illegal. Watch the lobbying efforts first; that's where you'll see "helpful" investor safety rules be proposed that begin the erosion of kickstart models.
I've been consistently disappointed by UK retail/commercial banks' online services.
My "business" bank (Cater Allen) provides maximum 13 months electronic history. Anything else you have to call and ask nicely to pay £10 for a snail-mail printout.
Fully aware this would be a problem, I tried to do due diligence before signing up and there's nowhere to get a decent comparison, e.g. see feature matrixes and screenshots of the various offerings.
They'll spend millions on football sponsorship and inane TV ads, but none differentiate on the basis of first-class online services a la Simple. Whoever is cloning Simple, please do it fast!
What I'm really after, which doesn't feel like a hard thing for a large company to add, is a read-only api. Give me an access token and a set of endpoints to get my data out and I'll be a happy bunny, because then I can build my own tools on top.
I find it's a shame that they don't really compete on features like this. Most people still go on personal recommendations (/OH GOD AVOID THIS BANK comments from friends). Either that or who will give me a few quid a year?
Excessive advertising is the best sign that you're going to get shafted in whatever ways they need to shaft you in order to cover the costs of signing up more people to shaft to pay the costs of signing up more people to shaft...
You see how this works? Finding a bank that doesn't operate like a ponzi scheme starts with finding one that doesn't advertise heavily.
Everyone in the comments here seems pretty pessimistic about what this is implying. I got the opposite impression--I think this report is actually very progressive, and that we should commend the economists at BBVA bank for identifying a trend so far in advance.
Most significantly, there is this quote:
>"For banks, crowdfunding poses a challenge ... However, banks should be prepared for this trend and make it work to their advantage."
Making crowdsourcing 'work to their advantage' is very different than making crowdsourcing illegal. It would be much more profitable for them to start up their own crowdsourcing platforms. That way, people deposit money into the banks interest earning accounts, AND they get a cut. Instead of 7% interest with a non-trivial chance of default (which, if you account for ~3% inflation, means their true benefit is only 4%), they get a clean 5% fee right off the top. With no risk. At all. Its free money.
This is a no-brainer for me. Banks are built to help people get the money they need to do what they would like to do. They would only stand to gain money by doing this on their own. Shutting down the whole system would be stupid, and I think the economists at BBVA would agree.
Article seems to be inventing a need in the banking set for yet another crowdfunding meets YC knock-off. For them I also have a bridge for sale, low mileage and runs great.
They are not a front for US Bancorp. They're a front for Bancorp Bank (http://www.thebancorp.com/), which is in fact a completely different and unrelated small bank.
> banks will have to follow a customer-centric approach and offer simple, user-friendly and effective products, with a high level of transparency and security
Simple is killing it on user-friendliness, and has the absolute best mobile and web banking interfaces I've ever used. They also tout the "very low operating costs" talked about in this article because they don't have a physical location.
To me, at the least, banking is taking deposits and making loans, neither of which Simple does by itself. It might provide a great front-end for another Bank which does those things, but I don't understand how that makes it the positioned for "future of banking", whatever that means to you.
I voted you up. People might think you post is spam for showing off what might be your own site.
But for me at the end of the day this site is about exactly this, to show of the product of your work.
Don't vote him up yet. Visa/Mastercard programs like Simple still have to be backed by a bank. If you scroll to the bottom you'll see it's backed by "The Bankcorp Bank."
Or maybe that's irrelevant to what you're saying, but it needs to be said.
> To what extent crowdfunding platforms will displace commercial banks in the retail and small business segments remains to be seen.
If crowdfunding gives banks too much trouble, they will simply complain to governments that they are "too big to fail" and that crowdfunding websites need to be regulated to their death.
BBC's Bottom Line did a podcast on alternative banking earlier this year, which might be of interest when discussing this topic. Especially about M-Pesa, which is truly disruptive in Africa.
Which investment has more risk? A typical market neutral hedge fund or a typical crowd-funded type start up. Obviously there are tons of idiosyncrasies, but I'm thinking on average. I noticed that I am allowed to invest in companies via crowd funding, but, since I'm not an accredited investor, I can't invest in a hedge fund. I would also venture to say that most people investing via crowd funding are not accredited investors.
However, they could be in serious trouble if an alternative payment system becomes popular. The stage is set - NFC and Bitcoin are growing in popularity, and the federal government recently began allowing merchants to charge a credit card fee.
If a taco cost $1.50 with my smartphone, or $1.75 with my credit card, I know how I'd pay.