To be sure, those billions don’t amount to that much in the broader context of traditional banking. Still, the cards represent two traditional banking functions now being handled by Starbucks — payments and storing money. If you buy a friend a Starbucks card with your own Starbucks card, you’ve added a third function: money transfers. In a sense, you’ve taken money you’ve saved with Starbucks and used it to pay someone else while Starbucks brokers the transaction.
Banks have surprising new competitors
— By Tyler Falk on March 4, 2014, 1:12 PM PST
I read an article that said that the US Postal Service could take care of financial needs of the poor. Currently, many do not have bank accounts because they can not keep enough money in the bank; many are having to use the services of pay day loan businesses. The problem with pay day loan industry is that the interest rate, 40 % and higher, can cause a small loan to balloon into a huge payment in a month.
The USPS will act like a bank and this can help the poor save money lost to high interest rates. I don't mind seeing the pay day loan industry disappear, their service hurts more than it helps.
In economics it's called "Schumpeter's Gale" or more commonly "Creative Destruction"
This is the process by which old businesses are replaced by newer innovative businesses, it's what drives capitalism, the economy and the people gain, old businesses go the way of the Dodo bird.
Perhaps it's time the banks get their comeuppance for their hubris.
I'm surprised the article neglected to mention the biggest threat to the existing financial industry: bitcoin. Sure, bitcoin has been in the news a lot lately, but the reason it has generated so many headlines is because it is the most disruptive technology that has ever challenged the old guard centralized banking system. A decentralized peer-to-peer money transfer mechanism has never been seen before, and when consumers discover how easy it is to use (whether or not they have any understanding of the protocol that supports the network), they find it much more secure and flexible than the traditional paper checks, debit/credit cards and wire transfers that now seem like quaint 20th century antiques.
@sboverie Because they can't think of anybody more competent to be handling other people's money than the post office?
This was proposal from Elizabeth Warren a few months ago. Since most of the target demographic for this concept is on multiple forms of government assistance, it's my guess is that she wants to convert the slowly failing post office into a 1-stop welfare shop. My guess is that the banking industry isn't going to mind, since these people are more trouble than they are worth, literally.
The Post Office in the UK already acts in this model. It has it's own financial products (joint venture with Bank of Ireland), and also allows many partnering traditional banks to do basic banking like paying money in/out at the thousands of counters in the UK.
It's disruptive to the world order, but until it is regulated or guaranteed by someone, it's very wild west, as per the recent vast scale thefts and bankruptcy at MtGox, where 'investors' are likely to have lost everything.
@terry.floyd Bitcoin is more of a threat to international transactions than domestic. There are many ways to transfer funds at low cost between people within the same region, once you start needing to change the type of currency used, then lots of money is lost via fees.
Bitcoins are really not more disruptive than travelers checks. Ultimately they are exchanged for real world currencies.