Banks 'Are Deathly Afraid of Disruptive Tech': Comments of the Week
May 7, 2015 4:00 PM
American Banker readers share their views on the most pressing banking topics of the week. Comments are excerpted from reader response sections of AmericanBanker.com articles and from our social media platforms.
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On a report that banks like Citigroup are trying to channel Silicon Valley's forward-thinking spirit by partnering with financial technology startups:
"Frenemies indeed. These guys are deathly afraid of disruptive tech."
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Photo: Citi chief innovation officer Debby Hopkins (Bloomberg News)
On the news that digital currency firm Ripple Labs has been fined by the Department of Justice and the Financial Crimes Enforcement Network for violating anti-money laundering rules (<a href="http://www.reddit.com/r/Bitcoin/comments/35459x/what_ripples_fincen_fine_means_for_the_digital/" target="_blank">via Reddit</a>):
"A fine of $700K in the financial services industry isn't very much. It's basically the annual salaries of a handful of mid-level developers."
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On how the enforcement action will affect Ripple Labs in the long term (via <a href="https://xrptalk.org/topic/6345-what-ripples-fincen-fine-means-for-the-digital-currency-industry/" target="_blank">XRPTalk</a>):
"I would argue that the outcome is net positive for Ripple Labs. Even if you look at the fine in isolation-$700k couldn't buy you anywhere near the publicity. But this is not to be cocky or belligerent. I don't think for one moment that Ripple Labs think like that."
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On the Consumer Financial Protection Bureau's move to cite a land-development company for failing to fix potholes in a Tennessee county:
"I am having trouble reconciling this article with another recent one of yours ['Backlog Forces CFPB to Slow Down New Investigations ']. Perhaps the CFPB needs some help prioritizing."
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On the argument that banks will be able to triumph over fintech startups because they offer the convenience of housing multiple products and services under one roof:
"Anyone who thinks banks and bank branches are more convenient than internet-based services is living in a dissociative state divorced from reality."
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On the factors driving small businesses and individuals away from banks and into the arms of marketplace lenders and online investment advisors:
"Small businesses and individuals don't necessarily go to a fintech company because they can get a lower rate, they go there because their bank turned them away in the first place. Between Dodd-Frank and bank risk [departments] crushing the ability to borrow (e.g. [former Fed chair Alan] Greenspan getting turned down for a loan), alternative forms of lending and capital formation are bound to occur. And here's what happens next ... people get used to borrowing and capitalizing online. Investors get used to funding these alternative platforms. Borrowing (and equity) costs go down for good credit risks, so they never need to give their banker a second chance the next time they need funds. Result is that banks get marginalized."
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Photo: Former Fed chair Alan Greenspan (Bloomberg News)
On the similarities and differences between payday loans and bank overdrafts:
"In a physical [payday loan] store, each advance is unique, initiated by a specific action of a customer on a specific date. The terms and conditions of an advance are fully transparent and agreed at the time of the transaction. Conversely, financial institutions trigger one or more overdrafts and [non-sufficient funds], without a depositor's knowledge and by methods which they (not the customer) can control. [Consumer activists'] indignation would be far more believable and effective if it were directed towards having all forms of short-term, small-dollar credit products play by a uniform set of rules that balance consumers' needs for credit with providers' need for a viable business model."
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On whether the CFPB is right to crack down on payday lenders:
"I am a huge believer in consumer choice and a disbeliever in 'the government knows best.' However, one of your members just one block from my office advertises on their LED sign loans for 9.99%-a reference to the rate they charge per month. A far cry from the actual 119% APR a bank would quote if we made the same priced loan. Unfortunately, these operators often are lending to the least sophisticated and knowledgeable borrowers. They most certainly have a right to be in business, and no doubt provide needed credit services-but I am a strong believer they should quote their fees in a manner to allow real comparison."
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On whether banks that respond to Operation Choke Point by cutting off customers deemed too risky are really upset about the Justice Department initiative:
"If banks are being forced, under Operation Choke Point and against their will, to cut off good customers, then exactly where is the outcry from said banks? Last time I checked, banks did have some sway in Washington."
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On the challenges involved in implementing the Legal Entity Identifier, a financial data standard, in the U.S.:
"We think the LEI, as important a concept as it is in fixing the plumbing of the financial system, was rolled out prematurely, and only in the [over-the-counter] derivatives markets. Things are not going well here and will only get worse if the LEI is not adjusted to more universal and already adapted protocols of other successful global identification systems."
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On the idea that community banks have the power to lighten their regulatory burdens by documenting strong credit management practices:
"Lighten its burden compared to what? How much new information must be produced and how will it be verified. The recommended actions impose burdens, in that it is difficult to persuade regulators of the sincerity with which any claim of best practices is put forth. Data show that accounting capital is increasingly manipulated as a bank falls deeper and deeper into insolvency."
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