google bank, one step backwards

for a long time i have been of the opinion that the natural transition for the googles and apples and facebooks is to turn into banks. some are already using FB to pay friends. google it seems is one step backward, at least as far as namecheap is concerned.

why was i at namecheap you ask? was looking at getting a new domain, but it turns out that the .skills (think – .com or .info) is not available. will share more on the skills component at some other future post.

Back to the banks (sorry IT giants), so I’m thinking, i’m not telling them nothing new. They know this stuff,

It makes so much sense, but why has the media not reported on this, why are the banks so tense?

Yeah, they will shake things up, more than a few will be upset. A few more will be delighted. The IT giants need to:

Figure out a way to grow,

by gaining our trust,

and keeping the transactions cost low.

Transaction cost

For the time being, the transaction cost has to incorporate the existing banking system. Therefore they have to stay in the total-cost-of-ownership of 2-5% of balance or other similar measure. For the time being that’s acceptable, users are ‘happy’ to accept that cost for the convenience. Some are even paying 10% with Western Union.

But imagine the scenario, 5 years from now where facebook has taken even a stronger foothold of Gen Y. All of these Gen Ys are going to be using facebook to pay for gigs, music, etc… Facebook just needs to grow it sufficiently and then start acquiring small banks, and paying someone else a transaction fee for helping them to open actual accounts for a global audience.

Think how happy the local post shop will be to be offered the ability to start banking accounts for Facebook…. Now that I write it, I can imagine a few sour faces too. Boo hoo, hoo. Nothing is stopping this banking gravy train.

so with time, as the transaction pool gets large enough, the Google, or the Facebook if you like, can start taking and paying transactions directly between it’s users. As they become big enough, the can get approval to become a bank or to acquire banks.

Once working as a bank, the operational model is simple. Slim most components that are customer facing as it should all be digital, and emphasise the service on FX trading and hedging, You’ll need a few more software developers. You’ll need a cheap way for people to get access the eftpos cards, though it’s looking like we are going for a cardless future. Not cash-less, but cardless.

The current machinery Facebook has is probably sufficient to cover the rest of the functions that will be necessary for regulatory and consumer appeal.

Trust

We trust the banks we currently use with almost the same data we trust the Internet Giants. And given that people are sending money over facebook already (you’ll all be doing it soon), I’d say that we are reaching a stage where we would be comfortable to have an internet bank as our main bank.

In new zealand they had an internet bank a long time ago. But it was not significantly cheaper, I think primarily due to it’s low global reach. People trusted that bank. It had no offices as far as I recall. And if you can get a Google Bank Card that you can use in most ATMs in the world, why would you not.

You know, if you get your travel insurance and accommodation package through Facebook, you get a free upgrade and a bottle of champaign. So stop procrastinating, upload your financial life to Google. Give them everything. You’ll be in one of their self driving cars soon anyway.

With that happy thought, I’m off to send some work email. Interviews to be had. Data to be collected.

Enjoy

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