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Patrick McKenzie Profile picture
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6 Dec, 4 tweets, 1 min read
This is a great, great read if you're interested in how money moves, since the shadow infrastructure here largely mirrors real infrastructure.
A number of people got in touch with me in the 2013ish era as a businessman with legitimate banking on both sides of the Pacific to help them move money out of Mt. Gox.

Which, as you might expected, I noped right out of.
Proposed transaction would sound like "I'll pay you $120k in JPY, coming from Mt. Gox. You pay me $100k in the US. It's a win win; I avoid Mt. Gox's banking delays and you make money."
In 2015, if you were a white guy in tech in Tokyo, you got the third degree when opening business bank accounts and/or were denied them, on suspicion you'd be either intentionally or de facto a cryptocurrency money launderer.

The irony was not lost on me when doing banking.

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Patrick McKenzie Profile picture
6 Dec
This is a great business waiting to be built. The state of the art for it, at places which charge $$$$ for tax preparation, is "Get out your calendar, tell us what days you were in X (perhaps by filling in Excel), and a ludicrously underutilized person will total by hand."
I have to reconstruct this every year from my Delta mileage statements.

(Well, it will at least be straightforward for tax year 2020.)
"Why do people care about this?"

I managed to pay taxes to both California and Illinois in 2019, two states I don't live in but did spend 10+ days in when I'd be deemed working.
Read 4 tweets
Patrick McKenzie Profile picture
4 Dec
I suspect a great deal of peoples' annoyance with KYC isn't anything which is actually *required*, but is hitting poor *implementations* of it, sometimes with no clear path forward, which prevent them from doing the thing they actually want to or have to do.
This is often times because post-opening KYC is generally coming from exception handling in the financial system, and because (for the types of transactions likely to cause that in the lives of "typical people commenting about KYC") it is an edge case and not very designed for.
You often see (or worse, don't see) cracks in the abstractions, too, where you are dealing with someone passing a message from someone passing a message from someone passing a message from the underlying call site which generated the exception.
Read 4 tweets
Patrick McKenzie Profile picture
3 Dec
One of the big promises of software is composability. You can build rich, powerful experiences out of basic building blocks.

APIs add new things to the toolbox. For example: Treasury, which lets an app/platform store, move, and track a business’ money.

stripe.com/treasury
I've been a small business owner and can talk at length about SMB banking, and will later, but let's put on the software developer hat right now.

Lots of software talks about money, keeps records about money, does calculations about money, but can't *touch* money.
This is extremely frustrating when you're building SaaS apps for businesses, because you have total control over your UX right until your app needs to touch money... at which point all data about it lives in a silo you can't access.

So you generally push work to the operator.
Read 53 tweets
Patrick McKenzie Profile picture
2 Dec
Back when I was a Stripe user, my #1 ask for 3 years running was Capital. (Loans based on anticipated future revenue, which my SaaS company had in abundance while my bank account was feeling rather lonely.)

We have now made that capability available for our customers' customers.
Historically, banks were the primary point of interaction with the financial system for small businesses, and that interaction was largely mediated by humans.

Increasingly, the interaction is via an online platform, which provides a lot of the front and back office of the SMB.
If, for example, you run a platform which helps connect contractors and home owners, you likely have better data on their businesses' pipelines, revenue history, customer satisfaction, etc than any bank could hope to have.

But you can't easily just offer lending.
Read 6 tweets
Patrick McKenzie Profile picture
1 Dec
There's an interesting microeconomics / finance / incentives angle here, where if this is your anticipation, you might decide to book the travel now and expect that providers will be lenient with cancellation/refunds if conditions worsen markedly over the next 6+ months.
Note that purchasing that option value is very much not a zero risk trade. For one reason, unlike financial options traded through a clearinghouse, you may be directly exposed to credit risk of the counterparty, which may not survive all possible futures.
Bonus lesson from credit card processing: the chargeback mechanism writes an option for the purchaser. The cost of it is bundled into the economics of credit cards, which are complex and involve multiple parties.

That option may have been mispriced in 2020 vis travel plans.
Read 4 tweets
Patrick McKenzie Profile picture
30 Nov
This is an interesting article, by the Lying For Money author (my favorite non-fiction book of last few years), which without saying the word fintech explains quite a bit of the fintech market opportunity in the 2010s.
One reason banks were not innovating as quickly as one would expect on customer-facing experiences is they were spending billions and lots of management attention on internal core systems to be allowed to continue operating their businesses at all.
(“Core” has a specific and idiosyncratic meaning in banking; I didn’t mean that one specifically.)
Read 4 tweets

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