Banks: What is Clean Banking?
Introducing sustainable banking.
A revolution is upon us.
The proliferation of mega-institutions built on exploitative practices has become unsustainable and is harming the world.
The solution? Clean banking.
Clean banking operates by:
Removing banks as individual platforms.
Opening competition for money to the world (all institutions AND real people).
Eliminating technical and legal inefficiencies.
Deleting harmful fee structures.
Facilitating through aligning user interests with intermediary (clean bank) interests.
Let's dig into each of these and contrast them with the current US system.
The order is not indicative of or meant to be construed as the optimal process for change, rather, it is the sum of actions required for the installation of a global clean banking system.
Removing banks as individual platforms
In the United States, banks and credit unions (to be referred to as simply "banks" as they are almost identical in function) operate as isolated entities.
Each isolated entity has its product line and unique pricing.
This product line is the exact same at every single institution so the real difference is only the product pricing.
To select a price from an institution (since all the products are the same), you have to go to their location (physical site or website) and complete an arduous signup process that requests sensitive data. The bank then reviews your information internally and decides if you are worthy.
Institutional prejudice exists at every single one of these banks - so the review process is the same but the outcomes may vary.
You must complete this redundant process every time you would like to obtain a new price.
Banks know that this process is a nuisance and many will seek to avoid the hassle regardless of the economic incentives inherent in obtaining new pricing (switching banks).
Because they know this, banks go a step further and adjust your pricing so they can earn more money (which means they pay you less or charge you more).
The only reason a bank would EVER increase how much they pay you or decrease how much you pay them is if the magnitude of pricing between banks is so high that you might actually take the time to switch to a different bank.
Thousands of data points are generated so that each unique bank can find the perfect pricing that balances paying you as little as possible (or charging you as much as possible) and the probability that you actually leave the bank.
Banks even add features that appear like they would be good for you, but actually are built so that it makes switching banks for different pricing even more of a hassle/more difficult.
So, in summation, banks as individual platforms are inefficient and built to exploit consumers. Consumers spend, directly or indirectly, thousands more than they should in the commoditized single platform bank market (only competing on pricing).
Clean banking eliminates both of these outcomes.
Clean banking adds a new layer to the dated system that alters the construct to a marketplace where the pricing (products) are various options. Similar to a typical marketplace, you can also choose different pricing on-demand and without any additional effort. Additionally, a marketplace structure is not predicated upon a business model that "wins" when customers lose. A clean banking marketplace simply facilitates the interaction between all individuals and all banks without actually participating in the market (saving or borrowing) itself for a profit. All profits in a clean banking system are generated in a micro-usage format - meaning the marketplace earns money by helping customers save or earn more while giving banks access to an organized capital and loan network.
With the clean banking system, inefficiency is eliminated and incentives are aligned.
Opening competition for money to the world
Traditional banks compete against eachother (but not really as we showed above) and, to a small extent, brokerages for money/deposits.
Both options compete entirely on price (again, the products are exactly the same fundamentally).
Lending is primarily a competition between banks, shadow banks (like Quicken), and peer to peer marketplaces.
Peer to peer marketplaces have mostly shifted to shadow banks (as they are backed by institutions as well) so we can essentially reduce it to banks and shadowbanks.
Rates paid and charged by banks/brokerages and shadow banks are largely dictated by regional or national competition (depending on their reach).
This cannot be described in any other way than customer exploitation.
For example, a community bank in Florida with an older/less digitally savvy customer base is really only worried how the bank up the road is pricing.
Who is missing from this equation?
Real people in the United States. Real people across the globe. International banks. International shadow banks. Businesses of various sizes with excess cash.
Clean banking brings every player to the table. In doing so, the winners in the global marketplace are those that provide the best prices. Losers are those that cling to the exploitative practices that worked pre-clean banking.
This marketplace shift is ultimately better for both sides but will be heavily attacked/resisted by those that are profiting most from the current system. In the United States, those profiting most are the largest banks and most isolated community banks (an interesting situation at that).
Eliminating technical and legal inefficiencies
Millions (if not hundreds of millions) of dollars are wasted every year on legal compliance across all banks/shadow banks/and brokerages in the United States.
Technical inefficiencies continue to grow as banks of all size are unable to keep up with the digital era.
Bank legislation has been crafted and altered since the early 1800's and has been consistently construed to maintain monopolistic conditions (in the name of consumer "protection").
It currently "requires" 3 regulatory agencies to directly supervise the system. There used to be 4 pre-savings and loan crisis. Depsite thousands of regulators, 2 world shaking US financial crisises have occurred during the last 40 years (not including those caused by the investments industry).
The classic argument made by the uneducated here is - "these agencies are funded by the banks and not the taxpayer".
First, who do you think the banks pass the costs along too?
Second, who do you think pays for bailouts?
Clean banking eliminates all technical inefficiencies that give away consumer money to unnessecary intermediaries. Clean banking eliminates redundancy and shifts process flow to the the optimal facilitation vendors. Additionally, it provides a far better mechanism for a competitive banking system (thus reducing the need for non-market oversight). Stated differently, banks built on bad business models (now that they have been shifted to pricing-only institutions) will not be able to compete.
Deleting harmful fee structures
This alteration is an extension shifting away from the singular platform model to an open (global) marketplace.
For those unaware, once bank competition drove "free checking" into existence, banks had to figure out a new way to exploit consumers to recoup their costs.
Strong/healthy "clean" banks would have simply looked to price competitively and actively grow their loan portfolio.
Most went the other way.
Banks started adding in overdraft fees, minimum balance fees, admin fees, paper statement fees - you get it.
They realized that most people do not read the entire terms & conditions upon opening their account so a "smart" strategy was to bury in some legal verbiage that gives them the right to charge you $35 for some bullshit fee they recently invented.
These fee structures steal thousands from consumers every single year and can be also be seen in lending (origination, closing, servicing, etc).
To note, fees have a place in the clean banking system as well.
However, fees structures in clean banking are predicated upon value being delivered for marketplace usage. In other words, unless the clean banking marketplace is earning or saving you money, zero fees will ever be charged. This is a circular process of value being provided and participants supporting the continuance of the system through usage fees.
Facilitating through aligning user interests with intermediary (clean bank) interests
This last feature of cleaning banking is truly the combination of the proceeding facets.
Traditional banking is structured so people give banks money, banks pay them a certain amount in interest for their money, banks lend the money that people gave them, banks charge the borrowers more than they are paying in interest.
Banks earn more by either paying money providers (depositors) less or by charging borrowers more.
It's really that simple.
They tag on fees to both to provide even more income for themself and justify doing so through jargon.
Clean banking is entirely different. By creating a marketplace for money, rather than an isolated platform, and only earning income by providing value (usage fees), everyone wins (but mostly real people and not banks).
Clean banking is built to help real people earn as much as possible on their money and to pay as little as possible on their loans. Clean banks have zero motivation to do anything except find you the best pricing at all times.
Clean banking is a better future for every member of the global community.
Those that lose in this new world are intermediaries (banks, shadow banks, brokerages) that refuse to evolve.