Israel's first new bank since 1978
reuters.com
reuters.com
For the US the amount of regulation that banks have to comply with is enormous. I'm not entirely sure all of it is value add. In contrast bitcoin has almost no regulations or controls around it. Is there not anything in between?
Pretty much every regulation is there because at some point someone figured out how to steal money from someone else, and the regulation prevents that. I don't really think there can be an in between.
You either have a totally unregulated market like Bitcoin, where it's incredibly easy to steal from people with absolutely no recourse (not even the courts), or you have what we have now where your money is "safe" and if something happens anyway you can be made whole through the courts, which would then lead to new regulations to prevent that thing from happening again.
If you're not careful with your machine, all it takes is some piece of malware lurking in the background to keylog your password, decrypt your wallet's private key, get the funds transferred from your wallet to the hacker's, and poof all your crypto is gone. That's game over. It's gone. No court or government can get it back for you unless they send a SWAT team to go steal the private key from the people who stole it from you.
If you're relying on Coinbase or another exchange to host your wallet for you, that's a different story, but at that point they're fulfilling a similar role that a bank does for you.. which to some is entirely what they're trying to get away from by using Bitcoin and such.
Far easier with bitcoin than in the olden days when you had to physically transfer cash (and then have the issue of laundering it)
https://mobile.twitter.com/patio11/status/122957996277401600...
If that were a regulated bank, the government would make them whole.
I'm in IT security for a financial institution, and we have regulators checking the permissions of our NTP configs and that IPV6 is disabled on our cloud instances.
Those are two trivial examples out of 10,000 I could give on how there is a cottage industry of regulators and consultants and auditors making things over complex, milking money from banks, and generally making it harder to do your job because one time, this one place had this one issue.
Frankly, I'd like to get out of the banking industry because of how stupid all this shit is - most auditors don't even know what they're talking about. It'd be like hiring some HN commenters to review the schematics of the 737 for safety.
From reading a little online, it sounds way easier to start a bank in the US than it is in Israel.
https://cdn.ilsr.org/wp-content/uploads/2019/05/number-of-ne...
Bitcoins are literally just pieces of a digital ledger system. No loans and all units of account are depedant exclusively on the ledger.
Regulating a bank is required because banks take in capital from account owners and take on additional risk by loaning that capital to others which may or may not get paid back. If banks lose money from bad loans to a point they dont have the cash available to service customer accounts the only thing they can tell people trying to make a withdrawel is 'tough titty'.
You don't have that problem with bitcoin. You get many other problems with it, volatile pricing and a complete inability to control money supply, but that's not one of them.
Branchless banking seems like a capability enabled only in the last 15 years by widespread internet adoption among customers as well as a transition to a cashless economy in the last 5 years.
Before then I'd imagine the physical startup costs and physical network effects of having hundreds of branches/ATMs, combined with low retail margins would've made it prohibitive for new competition.
Israel didn’t have new banks because the regulator preferred to protect the stability of the existing players, which are heavily regulated themselves. Israel had its share of troubles caused by banks in the 1980s and 1990s, and today banks are kept away from many asset classes and operations to ensure their stability and limit their clout.
You could say that the banking regulators gave a limited amount of players a license to print money but they had to play by very particular rules on who owns them, what they do and how their balance sheet looks.
Well said. Whatever the justification, protecting the profits of incumbents at the expense of new entrants is regulatory capture.
And to your latter point, here is an example: in the US telecom providers are highly regulated, but they also have largely captured the FCC.
Onerous amounts of regulation, contrary to perception, are good for incumbents. It makes launching a new business hard.
Fighting through regulatory barriers is one challenge for some European startups trying to achieve scale and displace or match an incumbent. (Very low turnover in top 500 EU companies vs US too 500)
Lastly I’d like to note that Israel has some room to improve on the corruption front - they are ranked as having higher perceived corruption than Spain and South Korea, two countries where the rich stay rich, and on par with Botswana. [0] And a bit below the US, where we already struggle with corruption and regulatory capture.
[0] https://images.transparencycdn.org/images/CPI2020_Report_EN_...
The banking regulators in Israel are quite upfront about their objectives of maintaining banking sector stability even at the cost of competition or cost to consumers. They even oversee banking boards.
Perhaps one reason is that the perceived corruption ranking that I shared is just that, while your measure dilutes "Corruption Perception," and "Corruption Experience," to just 42.5% of the measure, filling in the majority of the corruption measure with:
- Ratification status of Conventions
- Citizen's Voice and Transparency
- Government Functioning and Effectiveness
- Legal Context
- Political Context
- White collar Crimes
(source: https://risk-indexes.com/wp-content/uploads/2019/10/GCI_Tech...)
That said, clearly closed room deal-making is not the only challenge to new banks in Israel. It is a small market.
China, who does poorly on many measures of corruption, but does have a relatively robust market, has many banks to serve its massive population: https://en.wikipedia.org/wiki/List_of_banks_in_China
One difference is that corruption in China is often local (federalized corruption?): if you can't get something done in Guangzhou maybe you move it to Changchun and you can. That option doesn't exist in Israel.
A few factors:
- In Israel corruption is very aggressively prosecuted and will be featured on national news (the only kind of news. no local news there) repeatedly. It creates impression that corruption is everywhere
- Orthodox sector due to it's influence gets non-proportional amounts of money from budgets
- Everybody afraid to be a freier (https://www.latimes.com/archives/la-xpm-1997-jul-25-mn-16208...), so in case somebody else succeeds, some may assume that it's because of corruption, etc
- Having personal relations with somebody or been friend of a friend helps (to speed up a bit small things. no monetary exchange, just a favor)
PS. Couldn't find raw data from Israel for index
Some very interesting anecdote points - I'll say my personal references are an old boss, who is close to Israeli politics in the US, and Israeli emmigrants. (Main complaint was they liked forests and green more than the desert.)
I appreciate your context; and I did request the dataset from the risk-index organization, and will update here if I receive it.
AI for banking? Something like ‘our ML system said you don’t qualify for a loan’? Sounds so futuristic!
Kudos to any company that is trying to update the banking system. It could really use it.
Unlike the EU where digital banks can start in a small market and then expand by using their passporting rights a bank in Israel is constrained to a rather small market.
Did this improve a lot recently? Only 2 years ago, the Wall Street Journal described the inconvenience of Israeli banking this way:
> Banking occupies a special place among the complaints of Israelis. Banks refuse to give out the phone number of a designated representative. Most basic functions can be dealt with only in person at the branch where an account was opened.
> Tech workers - many of them American and European immigrants who came of age with mobile banking - can toil all day on some of the world's most advanced projects, only to find they can't email their bank any documents. Many Israeli banks demand documents in person, sent by mail or by fax.
> when [Aliza Landes, a] 35-year-old American-Israeli [,] recently tried to send money electronically to pay for her wedding dress, the experience was less than high tech. It took two hours on the phone, and then a trip to her bank branch, where employees manually added the send-money function to her app.
from https://archive.is/EongN / https://www.wsj.com/articles/whats-the-hot-device-in-startup...
- i have a designated representative for 20 years or so (usually it happens when you have income above average I guess)
- most of functions I could do via web site for many-many years. probably also via mobile app.
- been emailing documents to my bank for 5 years at least
- can make either local same day transfers or international transfers online, forever.
with regards to "trip to branch where employees added send-money function to app", you need to sign agreement for performing operations online and stuff (probably part of regulations). till you do it, web banking is a bit limited. those days you can agree to it online i think
Can do almost anything on the web. Can even cash in checks by taking a picture of them on the app. Calling the central number for the bank directs the call automatically to my personal banker based on my caller ID. I haven't been to the branch in years.
Although it is true that when you _do_ need to go in, you need to go to your own branch, which is something that surprised me coming from the UK.
Doesn't feel like there's any real competition there - the other competitors (Pepper and Paybox) don't seem to leave a mark. Hapoalim is definitely leveraging their might for digital dominance.
It takes some guts to publicly state « we have no clue how to do that thing our ex-customer now competitor claims is able to do , and we think nobody knows how to do it safely, and here’s why ».
It’s even more exceptional when you compare it to the gigantic amount of crap that many israelis startup advertize , surfing on the reputation of the country for being a startup nation (i can’t count the number of cancer cure that i’ve seen israelis biotech companies claim)