I’m off the deep end today, I think we need a new business model in banking and I don’t think the finance people have it, I think people know what they want, and an OSSbank or WikiBank project would perhaps be the way to approach the topic. This doesn’t mean that all and sundry can use private information, but certainly a ‘Bank API‘ would be a good thing if people had the ability to create programmes that could work within the framework to provide other services.
What does that mean? Well, take online-banking for instance, and one must wonder, is there not more I could do with my information to make my life easier? Could I automate more things? Could I have budget planning software that is fed from it? And the answer is ‘yes’.
But the reality is ‘no’ because no bank in Ireland will allow access to its information in that manner, even when the customer wants them to, they are taking data protection a step further in an effort to ‘protect us from ourselves’ and yet putting the wheels in the hands of finance houses hasn’t proved to be a great success either gauging by the state of the world economy.
An opensource bank would be one where capital adequacy ratios are high, and mortgages and certain other products would likely be distributed elsewhere, but things like over drafts, credit cards, checking accounts etc. would all be possible. Community banks in the US are an example, a bank that is actually based around a locality rather than a large box operation that tries to be all things to all people. The approach of using an API framework around this type of organisation would have a second function, if people try to do something online and can’t then it would be very easy for the contributors to create an e-solution to the problem presented.
For instance, if a bank was established and the people who are running their software propositions off the main structure realise there is a customer problem then it may be in their interest to create a widgetised solution that could be borrowed by other applications who work off the API but only if their branding is included, in other words, people would practically compete to find solutions, or if the solution is central to the overall service then the API owners may pay or give the widget advertising to the core companies clients about the secondary services available via this solutions creator.
What is stopping me, you, or anybody else? Fear and lack of expertise are two of the primary issues, but think about it, running a bank is not entirely different than running any other type of business, granted the product/service is financial but it all comes down to providing solutions to people who need solutions, and an opensource bank would have the ability to innovate far beyond what our current banks are doing.
Why has no Irish Bank offered their clients built in budgeting software with online banking? Why can’t you have the bills sent to your bank and posted to your account with an ‘execute to pay’ option, or e-billing and forward the mail etc. What about a simple accounting package online for small business customers to do their book keeping on?
I want a simple life when it comes to personal finance, and soon enough somebody will help me to have one, but who? I don’t see this coming from the big-box, rather we need some fresh blood, and to be done with a bank that isn’t ‘too big to fail’ rather one that is ‘too smart to fail’.
I have ossbarcamp attendence to thank/blame for this idea, what is truly amazing is the pure idea stimulation you can get from hanging out with a group of people you might not otherwise spend time around. I’m a finance guy, but a few hours hanging around with the tech crew at ossbarcamp really got the creative juices flowing.
Hi Karl,
“more I could do with my information to make my life easier?” – very good point and there’s a whole industry in the states around plugging
“Personal Financial Management” into online banking.
The current Irish offerings are shamefully inadequate so I took a quick stab at designing what a better banking experience could look like.
The problem is retail banking (i.e. banking for you and me) is seen as the poor relation in the banking industry. It makes so little money in proportion to the capital investment in people, property and technology compared to say, the treasury group in any standard bank. As a result any incremental improvement in services must be measureed against either an increase in profits or a decrease in costs. Its not that retail doesn’t make scads of money for the bank, its just that treasury makes *so* much more.
This is of course insane.
The problem with the above model is that if banks compared their retail divisions with othe retail businesses (e.g. Tescos, hairdressing, plumbing) rather than their higher powered investment banking divisions it would of course confirm that notwithstanding the current credit crunch, a retail bank operation is a license to print money.
I ran a team at CR2 in 1999 that planned to offer all the services you alluded to (and their are standards in this space such as OFX) via Internet banking but we couldn’t get a high street retail bank in Ireland or England interested.
However with the banks on the back foot there is an opportunity now to get them to release their grip on the data. Imagine if your bank worked like flickr and offered a REST API to all your data and the ability to execute any transaction you wanted with the appropriate key. That would be a real opporunity for both open source and proprietary technologies to innovate properly in this space.
Retail banking might be the ‘poor cousin’ but it was only dwarfed due to the exorbitant leverage which was the hallmark of commercial and shadow banks. The reality is that the business model using leverage to provide ‘great returns’ ultimately provided ‘great losses’, this shows the inherent mistake of treasury led/securitization lead models, and now that the tide has gone out we can see that the commercial banks were all skinny dipping.
A well run operation using an approach whereby there is community solutions would lower running costs, the idea would be to get as ‘near human’ interaction without having to go the route of branch distribution.
Regarding your experience at CR2, I can only IMAGINE the frustration! The reality is that it would take a NEW bank in order to do this as the existing banks are totally mired in their business models as well as their proprietary approach to doing business.
I think that a BankAPI would be a big step towards this, but the data protection -at least in practice- that we see in Ireland is more about ‘data use exclusion’ rather than a primarily inherent effort to protect the consumer. You can’t get your own info from a bank fed to another application, but they regularly lose laptops etc. with sensitive information on them about thousands of people!
I don’t think changing the attitude of current banks would work, it would require a totally new proposition, one that, from the outset has the mentioned goals in mind.