WePay (YC S09): Innovating Where Banks Won’t

http://www.xconomy.com/san-francisco/2010/07/08/innovating-where-banks-wont-talking-with-rich-aberman-about-wepays-vision-for-group-payments/

by waderoush • 16 years ago

114 49 16 years ago

xconomy.com

raheemm• 16 years ago

It does not seem like WePay will compete against Paypal. Why aren't there more paypal competitors? What are the barriers to entry?

sstrudeau• 16 years ago

I think the fact that only big players (Amazon, Google) have had any success at all in this area is illustrative. Regulatory barriers plus ability to deal with fraud at scale sets a very high hurdle. Not the kind of thing you can easily bootstrap.

zandorg• 16 years ago

Max Levchin said on Nerd TV that tackling fraud cost Paypal $100,000,000.

dkuchar• 16 years ago

Massive. http://news.ycombinator.com/item?id=1492098

illumin8• 16 years ago

Great article. I particularly liked the discussion about how they took their business through the YC process and to market.

It seems like WePay is a service that has a lot of potential. It also seems like it might have some potential for fraud and money laundering, so I hope that doesn't happen to the service.

narrator• 16 years ago

I read a bit of the history of PayPal. It seems like they spent an enormous amount of time dealing with fraud and security issues.

edash2• 16 years ago

Max Levchin is a WePay investor, though.

Fraud and security will be a headache, but they have access to smart people who have handled these issues before.

wugunz• 16 years ago

Wow, I feel like a total asshat. I did this years ago and called it GroupBuy.

The idea came to me when I was gathering money for a batch of shrooms my friends and I were buying.

Its good for buying large quantities of drugs with friends.

Idea #2 for me that I slept on.

Fuck me.

jrockway• 16 years ago

I agree with you, the tone of the article made it sound like the founders (and the VCs that funded them) cured cancer, solved world hunger, and eradicated all disease and unhappiness.

When in reality, they just found a way to take a cut of transactions. Just like every other financial institution. Innovation indeed.

powrtoch• 16 years ago

So... how awesome is it that the founders of this money-handling system are "Rich" and "Bill"?

sachinag2• 16 years ago

If you've ever met them, the actual awesomeness is just how bad-ass Rich and Bill are.

kiba• 16 years ago

Pretty please describe an anecdote showing how bad-ass and awesome Rich and Bill are.

Thanks, in advance.

fjabre2• 16 years ago

It's about time they started innovating in this sector.

The banking industry as of late seems like nothing but fraud and arcane outmoded banking policies (i.e. Why the hell do banks still close on Sundays???)

I hope WePay branches out into other services. It'd be a miracle if I could manage my bank account like I manage my other web 2.0 services.. It'd also be nice if the bank I was with gave a shit about having me as a customer.

Banking hasn't fundamentally changed for over a century and as the article points out, Paypal has been pretty lackluster in terms of innovation as well..

Banking is screaming for innovation and I can't wait to hear about more startups innovating in this space..

sachinag2• 16 years ago

If you're looking for an actual bank, BankSimple is going for this. The founders are smart ex-finance dudes, and Alex Payne is the guy in charge of the web app.

fjabre2• 16 years ago

I'm anxiously awaiting for them to come out of private beta. I've been following them for a little while now. It's exactly the kind of thing I hope to see more of..

jakarta2• 16 years ago

I had a conversation with the best banker I know about BankSimple. This is a guy that founded a bank in a major US city that had absolutely -0- non-performing loans, through the crisis. That is amazing when you compare it to the rest of the banks in our nation. The only one that come close in terms of performance/size is First Long Island. Here's what the banker said about these online bank start ups:

"One of the main problems with "online" banks is how do they make money. Most if not all have loan volume from somewhere else and are trying to find deposits to fund it - ING is an example. They try the internet route instead of opening expensive branches. ING has kind of dropped off the radar lately because they have credit problems (and I think it is a Dutch bank and you have read about the European problems).

If these people want to start an internet bank with no fees and make it up on the NIM, they need to invent a way to get people to borrow on the internet. No one has been able to do that yet with the exception of some payday lenders. Also, most of the internet banks so far have competed on price. They offer higher rates - which tend to attract "rate-shoppers". If they are not the highest rate, the rate-shopper will go wherever the highest rates are."

For a start up, I'm not sure if they will be able to compete on price. Banks like Wells Fargo benefit from their economies of scale because they are able to gather cheap deposits by cross-selling products (which is attributed to their success).

kscaldef3• 16 years ago

> Why the hell do banks still close on Sundays???

I'm confused. Does your ATM stop working on Sundays? Does your home banking stop working on Sundays?

The closest branch of my bank is 3000 miles away. The last time I stepped inside a branch was probably 4 or 5 years ago. I call them on the phone a couple times a year. The fact that they aren't "open" on Sundays is a complete non-issue for me.

tomjen3• 16 years ago

My online banking really does close between 2 and 6. No joke.

But I don't want a web 2.0 bank, I want a bank as boring as you can get it, one that only hires people with absolutely no life, with a plain boring website.

In want that because they are not a new and exciting thing, they are a place that should only ever do one thing: take my money, lend it extremly reliable people and give me an interest in the return.

ramchip• 16 years ago

> Does your ATM stop working on Sundays?

Actually, mine does (in Japan). I have no internet banking, although I think I could have it set up. For most banks it's possible to use an ATM at a convenience store after hours, but you have to pay extra fees on nights and weekends...

mcav• 16 years ago

My online banking doesn't let me do anything except transfer money between accounts.

aarghh• 16 years ago

This is true - why does a bank - bank transfer 24 hours or more, for instance? Why do I need to start my transfer during bank working hours?

thinkcomp2• 16 years ago

The Federal Reserve is working on speeding up the ACH network. Starting in August same-day ACH will start going into effect based on my understanding.

billclerico2• 16 years ago

the network is based upon nightly batch file exchange. it's a terrible system for 2010. but it was not bad for its time, and hard to change the system implemented by thousands of banks.

also, there is a risk component of it. holding transactions for longer decreases risk.

thinkcomp2• 16 years ago

My company is also working on the many problems in finance. We're hiring.

http://www.facecash.com

wensing• 16 years ago

As far as awesome bank experiences where you feel like a valued customer, etc, I couldn't be happier with ING Direct. They are amazing and worth a study for entrepreneurs looking to innovate in a very old space.

yanilkr• 16 years ago

A great Idea, but there is no secret sauce here. I wonder how difficult it might be for someone like Facebook or Google to rip this.

jimbokun• 16 years ago

Is there a WePay Facebook app yet?

nickpinkston• 16 years ago

At SxSW this year, there was a session on "Banking 2.0", and they (Mint, LendingClub, etc.) all agreed that their philosophy is to treat banks as dumb institutions - mainly to avoid regulatory pit-falls, etc.

WePay is following the same path, however the risk management side isn't seeing much startup activity at all. This means consumers win in experience, but systemic risk is largely the same.

mattmichielsen• 16 years ago

I wonder how legal it is to accept donations for beer brewing supplies from my friends "in exchange" for the beers I provide for them. The donation jar on top of the kegerator works, but a lot of people don't carry cash these days. I guess I'll find out.

johnrob• 16 years ago

Our first 30 beta testers were all Y Combinator founders

This seems like a powerful feature of YC!

pg2• 16 years ago

We deliberately encourage it. We learned about this technique from Google, who use their own employees to beta test everything.

In fact, this is part of the reason we've grown so fast. As we continue with YC it becomes increasingly clear how valuable the alumni network is (not just in this way of course but in others too), so the bigger we can grow it the better.

edash2• 16 years ago

On a single-page: http://www.xconomy.com/san-francisco/2010/07/08/innovating-w...

InclinedPlane• 16 years ago

Won't or can't? How much of the lack of innovation in banking due to regulation?

Baldy• 16 years ago

I don't know about regulations, but I've heard some horror stories from a friend of mine who works for a major bank. Most of the efforts his department has made -- toward rethinking and redesigning online banking -- have been thwarted by office politics.

ig1• 16 years ago

Because innovation comes with risk, and people by-and-large don't want to bank with a high-risk bank.

mkramlich• 16 years ago

I want a bank with a CLI.

WePay (YC S09): Innovating Where Banks Won’t

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