Daily Deposit 3.1.2023

GM. This is the Daily Deposit. The newsletter that helps bankers get better, not worse, everyday

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Today in Banking

FinCEN Issues Alert for Check Fraud via USPS: surging check fraud schemes

Sequoia and A16Z invested more in fintech than any other sector in 2022

BaaS in cannabis: Green Check Verified raises $6 million in Series A

Alternative credit scoring for SMBs - Uplinq

Stripe on track for $100 million in EBITDA next year

Banking 101

Durbin Amendment

Ole' Dick Durbin introduced the Durbin Amendment to the 2010 Dodd-Frank Act, covered in another edition of this newsletter. Dodd-Frank came out of the 2008 financial crisis bringing with it a bunch of rules and regulations to keep things from spiraling out of control again.

Dirty Dick proposed an amendment that aimed to regulate debit card interchange fees charged by large banks and payment card networks. The primary focus was regulating fees for large banks, but small banks were also impacted in a few ways.

Exemption for small banks:

Small banks, defined as banks with assets less than $10 billie, were provided an exemption from the interchange fee regulations of Dodd-Frank. For the banks that can keep assets below this level and maximize interchange, this is a solid win. The little guy has a chance to profit big now that they're not subject to the same fee limits as the big players like BoA and Wells Fargo.

Increased Competition:

As larger banks and payment card networks lowered their fees to comply with the regulations, small banks were able to better compete with them by keeping their fees relatively high. This helped to level the playing field for small banks in the payments market.

Loss of Revenue:

Despite the exemption, some small banks still experienced a loss of revenue due to the regulation. This was because they were often required to use the same payment card networks as larger banks, which meant they were subject to the same regulations even though they had fewer resources to absorb the costs. A new payment card network could come in disrupt this in a big way…

Higher costs for fraud prevention:

Lower fees is great, but with it came higher costs for fraud prevention due to the regulation. Payment card networks need to provide more detailed information on transactions, which small banks have to process and analyze in order to identify potential fraud. Small bank revenue would need to grow enough to offset these additional fraud prevention measures.

Overall, if small banks can find revenue channels separate from asset-driven revenue they can use the Durbin Amendment to get ahead. There may be a benefit to staying small. Having a plan for fraud prevention and managing new regulation is key to this loophole. As with anything, regulations may change, but for now, go get 'em little guys!

LULZ

1% Better

Misogi Challenge

"Do something so hard one time a year that it has an impact the other 364 days of the year. Put one big thing on the calendar that scares you, that you never thought you could do, and go out and do it." -Jesse Itzler

Misogi began as a Japanese Shinto practice of ritual purification by washing the entire body. This is typically done in the form of standing under cold water like a winter waterfall. Arctic plunge anyone?

I like Jesse's take on Misogi and have decided to take one on for myself. This newsletter. My misogi for 2023 is the launching of this newsletter. It serves 2 purposes for me.

1) it will be the best way for me to deepen my understanding of the world of banking.

2) I will hopefully learn what it takes to turn content creation into a business.

Putting my ideas to paper (or web) in a public forum is frightening to me, and that's why I must do it. I expect this to push me to my limits mentally, and to test my resolve and discipline. Think back on the last 5-10 years of your life. What memories have you made, and what impact have you forced in your own life?

reply with a Cold Stone bowl score… did you:

a) like it

b) love it

c) gotta have it