A Bank for Student Hackers

https://medium.com/hackclub/a-bank-for-student-hackers-e5d894ea5375

by zachlatta • 8 years ago

256 41 8 years ago

XiZhao• 8 years ago

Awesome work, congrats Hack Club!

JSneak• 8 years ago

The fact that you guys show a dashboard is amazing. Ive had too many bad experiences with long response times after asking how much money we had/trying to spend.

infinitebattery• 8 years ago

This is so great. As someone who used to run a Hack Club, it's so exciting to see this (would have solved a lot of problems for me back in high school).

Out of curiosity, are there ever plans to expand this beyond high school?

zachlatta8• 8 years ago

Potentially. We want to start by focusing on high school events, eventually start to provide more general financial services to clubs, and later may consider doing sponsorship for collegiate events.

So cool to see an alum on HN :-).

ethanhoroschak• 8 years ago

Amazing! Excited to see how this turns out!

driverdan• 8 years ago

This is a great idea.

Have you discussed this with a lawyer? It seems like this would qualify you as a money transmitter which has very strict requirements in many states. There are restrictions on the word "bank" and how that term can be used too.

deweller• 8 years ago

The money transmission licenses are very expensive too. You definitely should vet this with a lawyer before proceeding too far.

zachlatta8• 8 years ago

Fortunately we're not acting as a money transmitter, but rather as a fiscal sponsor - see https://en.wikipedia.org/wiki/Fiscal_sponsorship.

A very common practice in the non-profit world, but very much not something that is accessible to students. Most fiscal sponsors out there are very bureaucratic and not set up to handle short-term engagements like hackathons.

Sangermaine• 8 years ago

You've had an attorney with experience in this area confirm and help establish (e.g., by drafting the sponsorship contract) this arrangement?

zbruhnke• 8 years ago

Hey Zach, if you want to open bank accounts with an API and be able to provide real time balances to your users ping me ... I can help make that a reality

stephen_g• 8 years ago

Yeah, this is straight up illegal in my country (Australia) - to call yourself a ‘bank’ referring to financial services you need to be a licensed Authorised Deposit-taking Institution (ADI) with our prudential regulator (APRA). This requires going through a compliance program that would probably take longer than a year, having $50 million (!) of paid up capital, etc.

Just a few months ago they did bring in a new restricted ADI licensing scheme though where you can start with only $3 million and get started quicker but there are a bunch of restrictions.

ajdlinux• 8 years ago

Whilst what you say is true, I don't think it would be impossible to create a structure that achieves similar outcomes without being a licensed ADI.

If I were attempting to do a similar thing, rather than positioning the "bank" as a separate service, I'd be offering full "auspicing" as many national NGOs have traditionally done for locally-run activities, where the "bank" service is actually just automating internal financial procedures for authorising transfers of money that belongs to the incorporated body rather than accepting deposits on behalf of a separate group of people.

edit: hah, just read the comments below and this seems to be exactly what they're doing

kondro• 8 years ago

I'm pretty sure that's been relaxed to $35m. ;-)

Although the other onerous requirement for a bank is that it can't have any one owner with more than 5% shareholding (although there's a lender here that's trying to get the government to change that).

bhargavy• 8 years ago

This is the new standard for student run hackathons. Now, the students get both control and security for their money.

allenz2• 8 years ago

An underlying bank account with 501(c)(3) status, so donations to events are tax deductible

I'm not sure why the bank's tax status is relevant, since the bank doesn't own the funds. Also, most credit unions are nonprofit.

zachlatta8• 8 years ago

Important thing here is that events working with us can offer tax deductions to donors through our 501(c)(3) tax status.

Most sponsors for high school events want to see some sort of non-profit status when giving and it takes over a year and thousands of dollars to create a new entity in the US. With Hack Club Bank, they can get set up under our parent entity in under a week.

allenz2• 8 years ago

I see, donations are technically made to Hack Club. That's a cool hack, though I believe that you need some level of oversight over spending.

ganoushoreilly2• 8 years ago

"takes over a year and thousands of dollars to create a new entity in the US" This is a very misleading statement. 4 years ago I setup a 501(c)3 non profit and was able to get state and federal recognition, as well as all licensing necessary handled in a 4 month period from start to finish for under $400. What it does take is persistence and patience.

gbear605• 8 years ago

I'm not positive, but it seems like a natural direction to look toward would be FIRST robotics teams. New teams face a lot of challenges, one of which is getting to a place where they can get donations and have access to their funds.

jpjamipark• 8 years ago

As a FIRST alum, this would've been so helpful when looking for sponsors/donations. When you route your money through a school, it becomes a total pain to get access to it. A parent had to call/email the school for months just to get access to the money we needed to buy parts.

soared• 8 years ago

To do it yourself, you must incorporate and seek non-profit status which can take over a year and thousands of dollars in the United States

Joint business bank account at any major bank solves this. File for an llc in colorado (~$65) and open the account. Tax free, fee-free, and you can get multiple debit cards.

arcdigital• 8 years ago

That wouldn't exempt you from federal tax though.

zachlatta8• 8 years ago

Keep in mind most of our students are minors and many are in situations where creating new entities that increase reported personal income would put them in a compromising position - ex. push their family over the income threshold for a welfare program and disqualify them.

Sponsors for high school events also typically look for 501(c)(3) status before giving to events that benefit their community. I'm sure an LLC is a great solution for many, but there's a reason high schoolers don't already do this for hackathons.

TomMarius3• 8 years ago

This problem/market is very interesting and strange to me. In my country, you're able to open a bank account in 15 minutes, the only requirement is to have a parent present if you're under 15, of course you have to present your identity, and you have to deposit just 200 to 1000 CZK (7.5 to 50 dollars, or 5 to ±30 beers). No credit checks, no solvency requirements, no debt-free only policy, nothing like that, you literally walk out with a working bank account (and a debit card will arrive by mail shortly after) that is completely free for everyone and for all use cases that an average person has.

Bank accounts are treated as marketing for other financial services so you will even get free money if you open it in a bank that currently has a promotion (usually around 200 to 500 CZK - 7.5 to 20 dollars, or 5 to 12 beers).

hobbyjogger2• 8 years ago

Plenty of high school kids have bank accounts here. That's not the issue.

The problem is that a personal bank account doesn't qualify as a non-profit under U.S. tax laws. So donors can't write off the donation and the kid would be assessed income taxes on the donation.

TomMarius3• 8 years ago

Huh, that makes it even stranger. How do you e.g. share flats? Buy tickets for a concert as a group? Buy a plane ticket as a group? This is basic stuff...

akhilcacharya• 8 years ago

How are you handling debit cards?

valenciarose• 8 years ago

Are you actually a bank? That’s a highly restricted term. To the point that non-banking subsidiaries of banks (like brokerages) use the word Banc to avoid the restrictions.

finolex1• 8 years ago

I hope you would consider expanding this to cover all student organizations - it's not just hack clubs that hold events or seek donations.

dsl• 8 years ago

Just FYI, You can't call yourself a bank. It is a restricted term in most US states and the UK.

https://en.wikipedia.org/wiki/Banq_(term)

duxup• 8 years ago

This is a great idea.

Having said that, school groups do spend money, bands, clubs and etc.... how are the others doing it successfully?

"The only person who had access to the bank account was the principal, but nobody knew where he was. 24 hours later, Jake and I were on the phone with the vice principal who was also left in the dark. A week later, the principal showed up in Tokyo and the money was still completely restricted. They missed the deadline for purchasing the flights and the trip was cancelled. What the hell happened?"

What did happen? They never really explain that.

pah861• 8 years ago

I blame lawyers.

zachlatta8• 8 years ago

Most store money with their school, but rarely have budgets exceeding $1K. Clubs with larger budgets like band typically have much heavier faculty involvement, which is often not the case with Hack Clubs.

For Kapaa High School, the money is still sitting today in a restricted bank account only the principal has access to - the trip never happened and the donors are frustrated, to say the least.

antcas• 8 years ago

This is a great idea and solves a huge headache for hackathon organizers. Dealing with taxes and a multiple university accounts was a huge hassle at Bitcamp. We eventually became a non-profit which took over a year to complete. It would have been great to be able to use a service like this instead. Though, given the size of Bitcamp compared to most hackathons, it probably still would make sense to go through the extra effort to be our own non-profit entity.

A Bank for Student Hackers

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