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by Meekro
4141 days ago
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Hi Brian! I've read your API docs, and all this is pretty intriguing. As I understand it, you're offering this service so other people can write consumer apps for banking, and companies can integrate the API into their internal systems. I have just a couple of questions.. 1. What are your thoughts on dealing with fraud? While ACH is often reversible, wire transfers tend not to be. Established banks often have convoluted wire procedures (that often involve showing up in person at a branch) precisely because a fraudulent transfer -- even if the fraud was the user's fault because of phished credentials -- often results in the bank eating the losses. How will your company handle losses where somebody's API credentials got hacked, their balance transferred to Romania, and the victim notices and reports the fraud 59 days later? 2. One of the biggest limiting factors in bitcoin's growth right now is that exchanges struggle to get and keep relationships with traditional banks. No-doubt fraud prevention has a lot to do with this, but any bank that steps up to the plate could charge its partner exchanges huge fees and still be swimming in business. Have you thought about being that bank? |
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One thing I want to be clear about is that we will not support consumer bank accounts, either directly or through our customers. So it will not be possible to build your own branded consumer bank on SEED.
We expect our API will be used by companies that see value in automating their payments and receivables process, have a desire to integrate banking into their internal backend systems, have a desire to easily do analysis on their banking data, and so on. In the long run, we expect that most of our customers will use our mobile and web clients rather than using the API directly.
To answer your other questions:
1. Properly managing fraud is critical to our business. As you mentioned, the potential risks are scary both for us and our customers. Some of what we do will remain private, but over time we'll share more of our approach to ensuring the safety and security of our customer funds. While we intend to protect ourselves against loss as well as or better than traditional banks, we believe there are many ways to do so without the inconveniences that most banks impose on their customers. Our first hire is an expert in cryptography, mathematics, and infosec, so that should give you some idea of where our priorities are.
2. We have thought a lot about how to best serve the bitcoin community. In fact, that used to be our pitch -- a bank for the bitcoin economy. As we spent many months talking to bitcoin merchants and the community at large, what we found is that the problems they face are the same problems many businesses face -- existing banks are serving business customers poorly. Until bitcoin stabilizes as a store of value or derivative strategies are baked into the exchanges, we don't believe that bitcoin transaction volume will grow meaningfully, so we're not focused on serving bitcoin merchants right now. Since our platform is flexible, we'll be able to integrate bitcoin support if and when it becomes a need for our customer base, so we'll see what happens. Personally, I own bitcoin and would love to see it or other cryptocurrencies thrive, and I'm a believer in the blockchain as an enabling technology.
As to banking the exchanges, we're really limited by our regulators. We believe that properly operated exchanges that have MSB licenses and are running compliant KYC/AML programs deserve access to banking, and we believe that we can provide banking services to exchanges in a safe and lawful manner. However, the risk tolerance of our regulators does not always match our own. This is something we'll have to work towards. In the meantime, it's heartening to see that some exchanges appear to have found stable onshore banking relationships, such as Coinbase + SVB.