When is a bank a bank and when is a bank not a bank?
The question is not philosophical. Cutting to the quick, the new banking service described in The New York Times Business Section Wednesday begs for an answer. What is a service that has no bank branches, does not offer traditional paper check books to its customers, promises never to charge a fee for services (yet does already) and passes on its depositor responsibilities to CBW Bank and Bancorp, which the Times points out are federally insured brick and mortar banks?
The question that is much more fun is how is this sort of bank going to scare the big boys? The service called Simple, which does make money on card swipes -- that's called a fee in various neighborhoods -- was born of frustration with traditional banks, their customer-bullying rules and their stingy information feeds. Profoundly -- not too strong a word here -- it crawled out of the same petrie dish that gave the United States the torturous Dodd-Frank financial overhaul bill that attempts to corral every possible malfeasance in a 2,000-year-old industry.
So in one corner you have more than 600 pages of legal duct tape and in the other corner you have a bit of true-blue competition, the type that can steal customers from under Chase's nose just by being a touch more transparent. A race toward transparency would have saved a lot of late nights in Washington in recent years.
Simple has a showroom-less quality to it. Like Amazon.com, it is a digital endeavor and doesn't work if a customer is beyond the reach of the telecommunications grid. It promises detailed analysis of a customer's financial habits, including the ability to tell them how much they spent on shoes last year.
"Banks make money by keeping customers confused. There's no incentives to make the experience better," Simple co-founder Josh Reich told the Times.
Oh, that does hurt. Big banks are so tradition-hobbled and profit-focused that thinking outside the box from a customer's point of view is often changing the color of a deposit slip. From a business point of view, creative thinking means bundling securities together in not very transparent ways and then making side bets -- called derivatives -- on that. This leaves the customers high and dry and -- in 15 million cases or so -- unemployed, given the economic downturn and all of that.
So here's an online start-up with 20,000 customers, a track record of $200 million in transactions in 2012 and $13 million in venture capital. Board members at some banks earn bonuses that are larger than that. Still, those board members might be looking over their shoulders wondering how to compete with honest competition or maybe how to squash said competition using a few of their own paper checks to do so.
In international markets, the Nikkei 225 index in Japan rose 0.67 percent while the Shanghai composite index in China was flat, dropping 0.03 percent. The Hang Seng index in Hong Kong climbed 0.46 percent while the Sensex in India shed 0.38 percent.
The S&P/ASX 200 in Australia rose 0.38 percent.
In midday trading in Europe, the FTSE 100 index in Britain gained 0.72 percent while the DAX 30 in Germany climbed 0.23 percent. The CAC 40 in France added 0.16 percent while the Stoxx Europe 600 rose 0.5 percent.