Mark Cuban-backed banking app Dave to go public in $4 bln SPAC merger | Hacker News Reader

Mark Cuban-backed banking app Dave to go public in $4 bln SPAC merger

reuters.com

46 pointsmikesabbagh58 comments

Rushing to get ahead of a change that kills the business model? https://finance.yahoo.com/news/ally-bank-kills-overdraft-fee...

"Ally Bank kills hated overdraft fees — a huge money-maker for banks"

I wonder what its valuation will be if overdraft fees are completely gone before the deal closes.

Capital One 360 used to provide overdraft lines of credit, which let you draw up to $1000 beyond your balance and then pay the balance and a minimal interest fee later as an alternative to overdraft fees.

But they discontinued them for new accounts, I wonder why?

People who overdraft have an average balance of $350 in their deposit account. My hunch is it was too much risk even with Capital One’s predictive risk models. Better to sell them on credit cards instead (where the rate builds the risk of default in).

Back in they day, I’d overdraw my checking account by $980 with a $20 overdraft fee. Then I’d bring it up to $0 after a month and overdraw it again. It was cheaper than putting $980 on a credit card, not that I had that much in available credit. I was broke in the 00’s.

If you were bringing the balance back to 0, it would not be cheaper than using a credit card. What am I missing?

You're missing that financial illiteracy that causes someone to have enough money to reliably pay payday loans but not enough to pay their bills minus the loan fees.

I was certainly trapped in debt for reasons.

The interest rate on my credit cards was higher then the effective 24-ish percent interest rate I was paying (2% per month).

If you repay your card at the end of the billing period you do not incur interest. I ask this because if you were truthfully resetting to a $0 balance, your credit card was free. This is a common misconception.

I didn’t have enough money to pay it off and keep it paid off. That probably wasn’t clear. I’d get paid and have to choose between paying off the debt and paying rent. The reason I would take the account to zero and then overdraw again was that the account would be closed if overdrawn for longer than 30 days.

I used it a bit back in college to avoid overdrafts. When living with no income and under 1k in the bank, it was pretty useful.

It would predict automatic payments, and allow you to take out a small loan to cover the payment, avoiding about $35 in overdraft fees. And the best part was the payment back was 0% interest, only you couldn't use the service again until you paid Dave back.

I'm sure they got their money's worth from banking data after I left it signed in for 5 years. Eventually I deleted my account and unlinked my bank.

> Launched in 2017, Dave is an app used to help Americans avoid billions of dollars in overdraft fees charged by traditional banks.

Honestly my bank hasn't charged me an overdraft fee in years. Is that unusual? Is Dave more for unbanked or underbanked folks?

You're probably not their target market.

Looks like the target market is to separate investors from their money.

Even an account with a few grand in it will lead to pressured calls from tellers to enroll in investment services, at least from one major us bank.

The only comment needed in 99% of HN discussions

In my experience it has only happened when I had multiple transactions in the same day & the ones that dropped my account to low were recorded first. Usually if you have enough money in a different account with the bank you can just ask them what happened & most smaller banks will remove the fee.

There used to be an urban legend that banks would process transactions to produce deficits if possible in order to assess a penalty. I'm not sure if that was true or not though.

  balance 100

  deposit 500

  check 400

would be re-arranged to:

  balance 100

  check 400

  deposit 500

So they could hit you with overdraft fees.

https://www.forbes.com/sites/halahtouryalai/2013/06/11/yes-b...

> JPMorgan Chase says its policy is laid out in its Deposit Agreement which is available without a login. Transactions orders can vary by state. (See page 7 of the link beneath "Overdrafts".) Citi says it recently launched a program that simplifies the overview of account policies and outlines the fact that check and ACH transactions are processed in the order of smallest to largest to help minimize overdraft fees.

So not quite “to produce deficits if possible”, but certainly more convoluted than it should be, which is why the CFPB got involved.

It wasn’t an urban legend. The CFPB banned it, but it was quite common.

https://www.nytimes.com/2014/04/12/your-money/customers-can-...

> The report scrutinized the practices of 44 of the largest banks based on deposits. It found that half still reorder transactions from the largest amount to the smallest amount — known as “high to low” posting — rather than processing them either from the smallest to largest amount, or in chronological order. High-to-low posting tends to result in fees being applied to several smaller amounts, rather than one fee applied to a single, larger amount.

(from 2013)

I worked netsec for a small regional bank. They absolutely did this.

Ive always been more of a credit union type of person. But working in that sector made me feel predatory and like a carpetbagger, event though I wasn’t directly interfacing with these people.. I left the banking sector after a couple years.

JP Morgan Chase made $1.5 billion from overdraft fees last year.

https://www.rollingstone.com/politics/politics-news/jamie-di...

According to Elizabeth Warren. Their CEO disputed that. Neither party, nor this article appears to have cited any actual sources.

It’s confirmed by Bloomberg.

https://www.bloomberg.com/news/articles/2021-06-01/dimon-too...

(1.2% of JPMC 2020 revenue, which was about $120B)

They probably made 1/1024th of that, but that was enough for Elizabeth Warren to claim it.

I'm not sure why anyone uses banks instead of just using Fidelity for everything.

You get a brokerage, you can have your retirement accounts there, you get free checks, debit card with free ATM access, software that's best in class for finance (even if it's still mediocre compared to consumer software).

You can configure automatic bill pay, automatic investments, free money wires to external banks to pay rents, no fees for anything really, no useless savings account or restrictions.

Even the phone support is better than any other financial institution I've ever had to deal with.

Zero fee total market index funds, no fees really for anything.

I think the only reason people don't use them is because they don't know it's an option and they use whatever bank their parents used.

Is Fidelity better than TD Amertirade? I didn't realize this was an option.

I haven’t personally used both seriously, consensus when I searched around to consider switching was that Fidelity’s software/service was better so I stayed.

Do you get your direct deposit (assuming you have a normal job) to your Fidelity account? I've been considering moving everything to Fidelity.

Yep - works fine and was easy to set up.

Supplier diversity is an important part of financial risk management. Fidelity is good, but you don’t want to have all of your wealth tied up in a single institution.

Well, statements like "what doesn't everyone just use x" usually haven't been thought through too much.

One main reason is that I don't like the feeling of having all of my money stored by a single company. Especially if that company is operating with the goal of making profit. May be irrational, but having a single point of failure for all of my hard earned money just doesn't sit right.

I suspect most people are not using bank accounts as one account among many for financial diversification - the bank account is their sole account.

My question could have been more specific - I see little reason to prefer a bank to fidelity.

It is government insured up to 1.25M though - so I think the risk is minimal short of government collapse.

One reason I can think of is that (to the best of my knowledge) you can't deposit cash with Fidelity.

I generally like online banks, but for me personally, I regularly have scenarios where I need to deposit hard cash. And so far, I've found the only way to do that is to have an account with a conventional bank or credit union.

Fair point - I rarely deal with cash (and when I do I can just give it to a friend and have them apple pay or Venmo me).

I like the rewards from my bank's credit card for the utilities I use and the purchases I make. I won't get those benefits with just any debit card.

Yeah - you should still use a credit card, but you don't need your bank's account for that.

In fact, bank credit cards are among the worst in terms of rewards. You'd be better off with a different one most likely.

The reason I use a local brick-and-mortar bank is to get access to a safe deposit box. Besides banking is free as well. ( No fee for account maintenance, ATM, free checks, free Zelle payment to friends etc.)

You may want to rethink the safe deposit box: https://www.nytimes.com/2019/07/19/business/safe-deposit-box... - they’re not very safe and the banks aren’t interested in the service.

This side-hustle feature is pretty strange with very little info:

https://dave.com/side-hustle/

There's just something off about finding employment though your bank. Makes me think of living and working in a company town. But I'm probably not the target market at all.

Coincidentally, Channel 4 in the UK broadcast a series called "The Bank of Dave" in 2012 where a resident of Burnley called David Fishwick tried to launch a bank of the same name.

They subsequently couldn't get a banking license, and dropped the "Dave" name.

https://en.wikipedia.org/wiki/Burnley_Savings_and_Loans

I can't decide if that's funny or a shame. It is kinda funny the idea that someone would want to incorporate a bank featuring a name which, in the UK context, has come to by synonymous with a sort of average working class bloke. But it's kinda odd that the organization was refused a banking license then could (presumably?) only get one after that name was not involved. It isn't offensive in any way, I can't help feeling that if had a name associated with a higher class (Sebastian, Cuthbert, Peregrine, pick one) it would've been fine. The funny thing is that ultimately it was well-meaning and objectively for the public good - in that wikipedia article there is this quote:

> After six months of trading, BSAL had returned a profit and passed it on to various charities, including local food banks and community centres

Oh and for non-Brits the name "Dave" gained a bit of prominence starting in the early 00's, like the character "Dangerous Dave" referenced in the popular Da Ali G Show and a TV channel called simply "Dave" famous for re-running popular British programming from some other channels. It's not for no reason, I think the name "David" was quite popular until recently. To the extent that at my dad's work there were enough that they needed qualifier to disambiguate the different "Davey"s - Big Davey, Wee Davey, Young Davey, Auld Davey ... etc.

App names are getting out of hand these days.

My thoughts exactly, is "Dave" really the best we can do here?

These days, and also 8 years ago (Amazon Alexa), and 26 years ago (Microsoft Bob), and 38 years ago (Apple Lisa)…

In an alternate universe every app takes on a personality with their own name, and we treat installing apps like hiring people to be part of our personal life's team. Kind of a cool idea but you'd need to own the entire ecosystem for it to work. Then you could associate actions (looking up a contact) with people (Sam) and ask Sam through voice interface to do the action or something.

I've had my checking accounts set to deny charges when the balance is insufficient for years. I have played the odds with a floated check before, but it's really not that hard to avoid an overdraft. These days, I just buy everything on a credit card. I earn rewards, and there's no change of overdrafting.

How is it pronounced? Da-ve? Is it a latin word?

It's just Day-vh[1], like the English first name

[1] https://www.facebook.com/watch/?v=865289267582437

Like Dave from 2001: A Space Odyssey, except good.

Yup, lots of personal finance startups have "name" names: https://www.vox.com/the-goods/2019/11/4/20943551

Not intentionally, although it has an appropriate Latin meaning: "either give, or (else)".

I've never understood overdraft fees.

Why can't your card just not work if you don't have money?

Simple (RIP) worked that way. It was lovely back when I was broke.

Because then the bank would not make money on overdraft fees

Banks have to offer exactly what you described as an option. I make sure to set it (they throw a bunch of scary text at you telling you that you might not be able to pay for things if you turn off "overdraft protection," which is what results in overdraft fees.

Surely "Draft Dodger" or something is a better name.

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