Banks Are an Offer Many Families Can Refuse

@Tobyd: The problems wouldn't merely be technical. There was a point is US History where anyone could open a bank-- and a lot of crooks did. Now there is an  immense system of regulations and requirements in place.

Originally this was intended to protect consumers and level the playing field. It does that. But it also serves as an extremely effective barrier to entry. You can't merely rent a building, buy a safe and begin accepting deposits and paying interest-- you have to pick your way through an enormous jungle and need to hire a bunch of guides. 

That's a good thing, in that it prevents criminal behavior. But it also prevents the financial version of Steve Jobs and Steve Wozniak from making a product and selling it. (The same double-edged sword exists for drug manufacturing.)  People interested in offering solutions have to either (a) get a bank to take them under their wing or (b) buy an existing bank. (And, yeah, one of the mobile payment firms did that.)

If you're interested in an insanely interesting puzzle, type the word "bitcoin" into your friendly neighborhood search engine. That's an attempt to set up a currency system that isn't owned by any country. Just don't ask me to explain that to you, because some of that makes my head spin.

It is that your account information is available in the clear. It is a not something generally known by individuals. I used the banking app as an example. All HTTPS traffic displayed on the mobile web browser is decrypted. 

@Michael -- Agree, mobile banking comes with security risks.  But mobile banking is so convenient that I cannot resist.  I minimize my exposure/risk by mobile depositing into a small account, then later going online and transferring the funds from this small account into my main account.  The small account is simply a pass-through, so if access to the small account becomes compromised, there is only a limited amount of money at risk.

"it costs only a penny to process an electronic transaction. Nevertheless, banks often charge customers $5-$10 a month for online bill payment, calling it a premium service."

That seems to be a lot, but I don't see how this could ever change. Financial institutions, like any other business want to make money and it is just how things work in a free market, right?

Agreed. I have been wondering for a while what a banking system really looks like when you strip away the vaults and armored cars. It is basically a store and forward business with strong authentication controls. I was thinking that if the definition of banking could be re-written then many other enterprises could offer 'banking' and it would suit the public need, not the bankers. Will this ever happen..?

@Michael P. Kassner: Thanks for pointing that out. "Could be" isn't the phrase I would use. I'd sooner lend my credit cards to strangers than bank by phone or tablet. I don't do wireless internet banking. (In fact, I growl at my wife when she uses her debit card.)

At some point, I assume the technology will be properly secure. I would like to think that won't be too far in the future.

But then I would like to think that the Browns will win the Super Bowl. I'm not holding my breath until either of those things happen.

Since you are talking about online banking, I thought I might add a simple warning about mobile-device banking apps or using mobile-device's web browsers to do banking. There is a good chance the web browser developer or mobile app developer is running a MitM sending all your banking traffic to their servers then passing it along to the bank's servers.

The reason is so the web browser or app will display quickly and correctly on the small screen. In order to do that the HTTPS traffic has to be decrypted before getting to the bank. So your financial information is in the clear at that point and that could be a concern. 

http://www.techrepublic.com/blog/security/redirection-and-decryption-of-mobile-traffic-is-your-browser-a-mitm/9115?tag=content;blog-list-river

@kq4ym: Quite so. A better solution is a savings and loan association, most of which are locally-owned and privately held.

That industry, sadly, still hasn't recovered from the black eye administered in the 80's, from Charlie Keating, et al. Also, some of them lack the convenieneces (ATMs or debit cards) people have come to rely on and most of them are very bad at marketing.

The Cleveland area has an oustanding S&L--- best home loan rates in the area and an outstanding first-time buyers' program. But you wouldn't realize, unless you combed their web site carefully, that they offer checking accounts or havs ATMs. 

Banks like all businesses are in it to make a profit in their particular niche area. Seemingly they want customers with some assets (cash) that can be parked in the bank drawing little or no interest. And on the other end want to charge the highest fees possible for services (including overdrafts, interest, etc.)

On the low end of the asset spectrum, payday loan outfits caters to those with little cash, and charge the highest fees they can, often usarious in the general meaning of the term.

Walmart has begun to get into the banking business and maybe will meet somewhere inbetween, meeting the needs of those with some cash assets but not much.

It may be hard to find a bank that's friendly to all manner of customers, rich or poor. 

@Tobyd: Technically, what banks do violates the civil code. But it's still a violation of law.

It's the problem with being publicly-traded in this era. The notion of a stable investment that provides consistent, predictable returns is anathema, People want every listed stock to show high margins and explosive growth. Banking, as many people have pointed out, is is a low-margin business, if it is done properly. To generate high returns, you have to play games.

There are likely to be one of two endgames.

First. credit unions supply excellent service... but, all too often, they're technological backwaters. The one my wife's employer uses doesn't offer a debit card, online bill payment-- or even a web site that's anything more than a brochure.  They move into the current century, that's a major threat.

Second, if mobile payment systems become secure and reliable, there will be virtually no reason for most people to use a bank. Time did a story about mobile money systems in Afghanistan not long ago.