Comment by jacquesm | Hacker News Reader

Comment by jacquesm | Hacker News Reader

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Starting a bank from scratch will have you worry about other things than the technology of your IT department, mostly to do with solvency and staying clear of SO.

Sure, at some level the technology will come in to play but nobody will 'start a high tech bank'. For instance, ING direct (one of the efforts of the banking industry to leverage the use of technology) was jump started from the legacy ING systems and as far as I know still ties in to them for all of their back-end stuff.

When I was the 'systems administrator' for the corporate division of a bank (in 1986 or so) we had daily rounds of getting the signatures of the various people responsible that the totals for the night batch runs were correct. That's the sort of responsibility you're talking about, I can't imagine that an MD5 or some digital signature would be sufficient today, it's all about procedures and accountability, emphatically not about technology.

I got one of the first PCs the bank bought on account of our project manager being very forward thinking but nobody ever thought of it as more than a curiosity and something that might be a handy replacement for the terminals.

That attitude has changed a bit but not by much and that's 25 years.

Well, nobody would have built another search engine either, but google did it. Part of the problem is the legacy mindset of the higher ups at financial institutions combined with their extremely conservative nature.

I currently work in a fairly large financial institution, giving them a web presence for various services and the backend system is no longer a mainframe but an AS/400. Though it still runs COBOL-based apps, so it's really no different than the standard mainframe.

I'm not sure I follow you on the google link here.

Google built another search engine, which ran on a cluster of PCs and did so more efficiently than the big competitor at the time, AltaVista, which ran (afaik) on a cluster of Dec Alphas. Because google needed lot of horsepower and had a tight budget they came up with some pretty clever packaging ideas for their cluster.

In that sense both these companies took the best route to a solution. Now a search engine is materially different from a bank in that if something goes wrong in a bank the potential damage (not just to the bank, but also to the customers of the bank) is enormous.

A search engine that spits out 'wrong' results is still a search engine. A bank that doesn't know where your money went is no longer a bank (at least, not for very long).

Financial institutions rely heavily on their image of reliability, much more so than any web company.

I was speaking more about the mentality that led to the business opportunity that google exploited. More so than the technology. The mentality at that time was that "nobody would build another search engine". Any time I hear someone say "nobody would..." I think about how that mentality allows you to exploit that opportunity.

In this case, I'm referring to banking. You've got an industry that is based almost entirely on legacy systems that has not evolved with the progress of technology. As correctly pointed out, you would not want to modify an existing legacy system to move it to a new technology, which is why nobody has done so. What I'm referring to is a new, from scratch, bank with new technology. One that would allow you to disconnect from the current banking model and allow you to offer services that nobody could provide with today's legacy systems.

This combined with the fact that if you ask any bank customer they will tell you how much they hate their bank and hate the service. Sounds like it's ripe for the pickings with the right investment, investors and people.

I don't think the mentality was that 'nobody would build another search engine', it may have been around where you were at the time but I know plenty of people - myself included - that were wondering about building another search engine. Also, altavista definitely wasn't the only player. Even today, with google as established as it is I'm pretty sure there are at least several hundred people involved in building new search engines. Whether one of them replaces google at any point in time remains to be seen, but it's definitely not classed as a 'hopeless problem'.

As for the banking bit. You are missing my point, nobody builds a bank because of the technology, people found new banks because of the money. If that means adapting old, tried and true technology to jump trough new hoops then that's a cost of business. Bankers are conservative by nature, not because they like it but because it makes very good business sense when you're a bank. It's no coincidence that banks, insurance companies and governments are the areas where the mainframe is still dominant.

I'm really not sure what kind of services you could offer with a 'new' software stack that you could not offer with the old one. Bank transfers are routinely done in seconds between banks, you can pay with everything from credit cards to mobile phones and computers, they seem to have done a remarkable job at adapting to new tech while remaining conservative at heart.

People hate their banks mostly for the costs and for the lack of human interest, rarely if ever because of the lack of technology. In fact, I could do with less technology and better human interaction.

I can think of a lot of new products and services a bank could offer. You would have the opportunity to rethink the standard checking/savings account world and hybridize cd's and savings accounts. There has been so little innovation in banking (some would say that it's because of how banks are tied to legacy infrastructure) that a re-think of what exists and what customers want would be very refreshing.

I think the best part would be that because of the legacy technology in place at existing banks, they would have a very hard time making changes to adapt to anything new that would be offered. Just imagine adding a new account type that isn't checking or savings and has new rules. How long would it take for a bank to re-write their backend system to incorporate that change? A long time.

If a disruptor entered banking and did offer this kind of change, I think you'd have banks banging down your door to buy you out, if nothing else.

Interesting. My bank has lots of different account types that aren't checking or savings, and all of them have different rules (and I use a few of those).

There is a big temptation to assume that banks don't do stuff because they're technologically inept, but I don't think that's the case. The bank I worked for was a subsidiary of the Chase Manhattan bank and as far as the hardware went they were cutting edge at the time.

Software driving products that were the banks income was extremely well documented and extremely well protected in terms of changes to the code and who could do what with it. Security was tighter than a gnats ass, both physical and network wise, with round the clock monitoring and so on.

A banks idea of disruption is not the fear of some new tech, banks know that technology only appears to move fast, they can afford the wait until something has proven itself.

A bank fears things like paypal, that obviate the need for banks and their 'products which are the privilege of accessing your own hard earned money'.

Banks have tons of special products in their inventory, the fact that you don't actually see them in the wild is that you are mostly looking at the consumer side of the operation. On the business side the special products are the majority. Then there is all the regulatory business, that too is responsible for an enormous amount of code.

For a newcomer the barrier to entry is not technology, it is simply the vast headstart that existing banks have in terms of knowledge, marketing power and financial resources.

I'm only aware of one bank that started in recent times that was not tied to another bank, and unfortunately it went bust.

Thanks for the exchange by the way, that was interesting. Who knows, maybe one day you'll found that disruptive bank based on high-technology!

I think there are new banks starting up and some probably see themselves as high tech operations. But in that sector that means J2EE and not Ruby on Rails.

Personally I think that any new banks should use NoSql to store their data and use haskell for their core code.

I don't disagree, I just meant it from a realistic/pessimistic point of view.

It was in jest, a serious answer would have been to use Erlang, which I think is 'hot' new tech (for those that don't know how old it really is, it's 'new' to them so it must be new to everybody) and a suitable replacement because of the design rather than j2ee.

I imagined reading that aloud in thick Swedish accent to get in the mood for how serious Erlang is :) (just joking: I'm refering to the famous Erlang demo video)

Why so?

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