WePay (YC S09): Innovating Where Banks Won’t(xconomy.com)
xconomy.com
WePay (YC S09): Innovating Where Banks Won’t
http://www.xconomy.com/san-francisco/2010/07/08/innovating-where-banks-wont-talking-with-rich-aberman-about-wepays-vision-for-group-payments/
13 comments
> Why the hell do banks still close on Sundays???
I'm confused. Does your ATM stop working on Sundays? Does your home banking stop working on Sundays?
The closest branch of my bank is 3000 miles away. The last time I stepped inside a branch was probably 4 or 5 years ago. I call them on the phone a couple times a year. The fact that they aren't "open" on Sundays is a complete non-issue for me.
I'm confused. Does your ATM stop working on Sundays? Does your home banking stop working on Sundays?
The closest branch of my bank is 3000 miles away. The last time I stepped inside a branch was probably 4 or 5 years ago. I call them on the phone a couple times a year. The fact that they aren't "open" on Sundays is a complete non-issue for me.
My online banking really does close between 2 and 6. No joke.
But I don't want a web 2.0 bank, I want a bank as boring as you can get it, one that only hires people with absolutely no life, with a plain boring website.
In want that because they are not a new and exciting thing, they are a place that should only ever do one thing: take my money, lend it extremly reliable people and give me an interest in the return.
But I don't want a web 2.0 bank, I want a bank as boring as you can get it, one that only hires people with absolutely no life, with a plain boring website.
In want that because they are not a new and exciting thing, they are a place that should only ever do one thing: take my money, lend it extremly reliable people and give me an interest in the return.
To be clear, I don't have a "web 2.0" bank. The only thing non-traditional about my "bank" is that they are actually a credit union. However, they are able to do pretty much everything I need either online, over the phone, or via mail.
> Does your ATM stop working on Sundays?
Actually, mine does (in Japan). I have no internet banking, although I think I could have it set up. For most banks it's possible to use an ATM at a convenience store after hours, but you have to pay extra fees on nights and weekends...
Actually, mine does (in Japan). I have no internet banking, although I think I could have it set up. For most banks it's possible to use an ATM at a convenience store after hours, but you have to pay extra fees on nights and weekends...
Doesn't that defeat the purpose? Like having a car with no air that only travels as fast as you walk.
My online banking doesn't let me do anything except transfer money between accounts.
Get a better bank?
My online banking allows me to:
My online banking allows me to:
* transfer money between my accounts (one-time or repeating)
* bill pay (electronic or physical check, one-time or repeating)
* request a wire transfer
* request an electronic transfer to an account of mine at another financial institution
* apply for a loan
* open a new "club" savings account
* and more, but that's about all I recall ever making use ofIf you're looking for an actual bank, BankSimple is going for this. The founders are smart ex-finance dudes, and Alex Payne is the guy in charge of the web app.
I had a conversation with the best banker I know about BankSimple. This is a guy that founded a bank in a major US city that had absolutely -0- non-performing loans, through the crisis. That is amazing when you compare it to the rest of the banks in our nation. The only one that come close in terms of performance/size is First Long Island. Here's what the banker said about these online bank start ups:
"One of the main problems with "online" banks is how do they make money. Most if not all have loan volume from somewhere else and are trying to find deposits to fund it - ING is an example. They try the internet route instead of opening expensive branches. ING has kind of dropped off the radar lately because they have credit problems (and I think it is a Dutch bank and you have read about the European problems).
If these people want to start an internet bank with no fees and make it up on the NIM, they need to invent a way to get people to borrow on the internet. No one has been able to do that yet with the exception of some payday lenders. Also, most of the internet banks so far have competed on price. They offer higher rates - which tend to attract "rate-shoppers". If they are not the highest rate, the rate-shopper will go wherever the highest rates are."
For a start up, I'm not sure if they will be able to compete on price. Banks like Wells Fargo benefit from their economies of scale because they are able to gather cheap deposits by cross-selling products (which is attributed to their success).
"One of the main problems with "online" banks is how do they make money. Most if not all have loan volume from somewhere else and are trying to find deposits to fund it - ING is an example. They try the internet route instead of opening expensive branches. ING has kind of dropped off the radar lately because they have credit problems (and I think it is a Dutch bank and you have read about the European problems).
If these people want to start an internet bank with no fees and make it up on the NIM, they need to invent a way to get people to borrow on the internet. No one has been able to do that yet with the exception of some payday lenders. Also, most of the internet banks so far have competed on price. They offer higher rates - which tend to attract "rate-shoppers". If they are not the highest rate, the rate-shopper will go wherever the highest rates are."
For a start up, I'm not sure if they will be able to compete on price. Banks like Wells Fargo benefit from their economies of scale because they are able to gather cheap deposits by cross-selling products (which is attributed to their success).
Borrow money on the internet?
Isn't that what start-ups like http://www.zopa.com/ are all about? Disclaimer - I'm not affiliated with them in anyway.
Isn't that what start-ups like http://www.zopa.com/ are all about? Disclaimer - I'm not affiliated with them in anyway.
Which "European problems"?
George Soros just penned an article on Euro-zone issues:
http://www.nybooks.com/articles/archives/2010/aug/19/crisis-...
I'm anxiously awaiting for them to come out of private beta. I've been following them for a little while now. It's exactly the kind of thing I hope to see more of..
As far as awesome bank experiences where you feel like a valued customer, etc, I couldn't be happier with ING Direct. They are amazing and worth a study for entrepreneurs looking to innovate in a very old space.
This is true - why does a bank - bank transfer 24 hours or more, for instance? Why do I need to start my transfer during bank working hours?
The Federal Reserve is working on speeding up the ACH network. Starting in August same-day ACH will start going into effect based on my understanding.
there is still a 48 hour window for transactions to be returned because of insufficient funds. and same day ACH will only be supported by a small subset of banks (and none of the big ones, at least for a long while)
the network is based upon nightly batch file exchange. it's a terrible system for 2010. but it was not bad for its time, and hard to change the system implemented by thousands of banks.
also, there is a risk component of it. holding transactions for longer decreases risk.
also, there is a risk component of it. holding transactions for longer decreases risk.
My company is also working on the many problems in finance. We're hiring.
http://www.facecash.com
http://www.facecash.com
So... how awesome is it that the founders of this money-handling system are "Rich" and "Bill"?
If you've ever met them, the actual awesomeness is just how bad-ass Rich and Bill are.
Pretty please describe an anecdote showing how bad-ass and awesome Rich and Bill are.
Thanks, in advance.
Thanks, in advance.
To make it hard to quit they got a dog together. It's supposed to be the company's dog, not either of theirs
individually. The idea being that now the company can't go away or there's no one to take care of the dog. Increased the burn rate a little but turned out to be a net win.
I know it's not really the same situation, but this reminds me of couples who have a child to help protect/save their marriage. This usually hurts, rather than helps the marriage.
True, but it's not as bad as that. In the end, if you had to, you can give away the dog to a good home with a lot less paperwork. ;)
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Bill was working at Goldman Sachs and Rich was in Hong Kong doing an internship. Rich was a little bored, so they started a company in Hong Kong selling advertising on taxi cabs. They landed a deal with the largest cab company in the city.
Great article. I particularly liked the discussion about how they took their business through the YC process and to market.
It seems like WePay is a service that has a lot of potential. It also seems like it might have some potential for fraud and money laundering, so I hope that doesn't happen to the service.
It seems like WePay is a service that has a lot of potential. It also seems like it might have some potential for fraud and money laundering, so I hope that doesn't happen to the service.
Our first 30 beta testers were all Y Combinator founders
This seems like a powerful feature of YC!
This seems like a powerful feature of YC!
We deliberately encourage it. We learned about this technique from Google, who use their own employees to beta test everything.
In fact, this is part of the reason we've grown so fast. As we continue with YC it becomes increasingly clear how valuable the alumni network is (not just in this way of course but in others too), so the bigger we can grow it the better.
In fact, this is part of the reason we've grown so fast. As we continue with YC it becomes increasingly clear how valuable the alumni network is (not just in this way of course but in others too), so the bigger we can grow it the better.
At SxSW this year, there was a session on "Banking 2.0", and they (Mint, LendingClub, etc.) all agreed that their philosophy is to treat banks as dumb institutions - mainly to avoid regulatory pit-falls, etc.
WePay is following the same path, however the risk management side isn't seeing much startup activity at all. This means consumers win in experience, but systemic risk is largely the same.
WePay is following the same path, however the risk management side isn't seeing much startup activity at all. This means consumers win in experience, but systemic risk is largely the same.
On a single-page: http://www.xconomy.com/san-francisco/2010/07/08/innovating-w...
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It does not seem like WePay will compete against Paypal. Why aren't there more paypal competitors? What are the barriers to entry?
I think the fact that only big players (Amazon, Google) have had any success at all in this area is illustrative. Regulatory barriers plus ability to deal with fraud at scale sets a very high hurdle. Not the kind of thing you can easily bootstrap.
I wonder how legal it is to accept donations for beer brewing supplies from my friends "in exchange" for the beers I provide for them. The donation jar on top of the kegerator works, but a lot of people don't carry cash these days. I guess I'll find out.
Won't or can't? How much of the lack of innovation in banking due to regulation?
I don't know about regulations, but I've heard some horror stories from a friend of mine who works for a major bank. Most of the efforts his department has made -- toward rethinking and redesigning online banking -- have been thwarted by office politics.
Because innovation comes with risk, and people by-and-large don't want to bank with a high-risk bank.
I want a bank with a CLI.
Wow, I feel like a total asshat. I did this years ago and called it GroupBuy.
The idea came to me when I was gathering money for a batch of shrooms my friends and I were buying.
Its good for buying large quantities of drugs with friends.
Idea #2 for me that I slept on.
Fuck me.
The idea came to me when I was gathering money for a batch of shrooms my friends and I were buying.
Its good for buying large quantities of drugs with friends.
Idea #2 for me that I slept on.
Fuck me.
I agree with you, the tone of the article made it sound like the founders (and the VCs that funded them) cured cancer, solved world hunger, and eradicated all disease and unhappiness.
When in reality, they just found a way to take a cut of transactions. Just like every other financial institution. Innovation indeed.
When in reality, they just found a way to take a cut of transactions. Just like every other financial institution. Innovation indeed.
The banking industry as of late seems like nothing but fraud and arcane outmoded banking policies (i.e. Why the hell do banks still close on Sundays???)
I hope WePay branches out into other services. It'd be a miracle if I could manage my bank account like I manage my other web 2.0 services.. It'd also be nice if the bank I was with gave a shit about having me as a customer.
Banking hasn't fundamentally changed for over a century and as the article points out, Paypal has been pretty lackluster in terms of innovation as well..
Banking is screaming for innovation and I can't wait to hear about more startups innovating in this space..