Earlier this month, Stanford Senior Fellow Paul Romer wrote an op ed for the Wall St. Journal titled “Let’s Start Brand New Banks” – writing that “investing the TARP funds in new banks will do more to help the troubled but potentially viable existing banks than giving funds directly to them.”
Earlier this week, Charlie Rose had a full hour interview with Marc Andreessen which I found fascinating. The topics ranged widely – Facebook, Ning, Marc’s new venture fund, etc. But the most interesting part to me comes shortly after minute 48:00 into the video as Marc starts talking about banks – referencing Romer’s recent op ed.
These new banks would be new – and online – without the legacy infrastructures and burdens that the “old banks” continue to bear. As Marc says “a bank is a simple concept – you can create a bank in software.” He goes on to talk about eBay’s recent purchase of Bill Me Later (Marc’s on the board of eBay and obviously proud of the acquisition!). But his point is right.
See my comment here to Erin’s earlier post about whether I’d pay a premium for the right kind of online banking. In reality, only one of the “new banks” is capable of providing what I really want. Unfortunately, the legacy old banks seem just way too tied up in unwinding their mistakes to innovate in that way.
I was on the board of one of the first Internet banks in the US some ten years ago. Unfortunately, that bank was ahead of its time and was ultimately sold. We’re entering a new period when the timing seems ever so right for that kind of bank – more so than ever before. ING Direct is the most recent example of “getting it” – by focusing on primarily on savings and secondarily on prime mortgage lending for their own book. Who will be the next new bank?