No, there is not going to be an agentic bank run

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Hello fintech friends,

Apollo economist Torsten Slok this week kicked off a frenzy of nervous hand-wringing and fintech op-eds with his thesis that the adoption of consumer financial agents will lead to an ‘agentic bank run.’ As he wrote, “Muse […] could soon sweep household cash automatically into accounts paying 3.3% to 5.0%, instead of the 0.1% national average.”

Banks and fintech founders can take a breath. This isn’t happening any time soon.

Like many arguments over the years in fintech (cough — payments are commoditized and take rates will go to zero — cough) , the agentic bank run idea demonstrates a good understanding of tech and a bad understanding of people.

Think of what goes into switching a bank account. Yes, an agent can automate the application process and deposit sweep. But what does the human user experience? What happens when you need to use an ATM, and realize all your funds were swept to another bank overnight? What happens when you need to make a mortgage payment but your ACH hasn’t cleared from is fifth sweep this month? What happens when you try to use your credit / debit cards, but they were all closed earlier this month when your agent moved you to a new bank? What happens if an agent is unavailable, you go looking for your money, and have to look through 20 different accounts to find it?

Slok’s thesis rests on the assumption that the only account user will be an agent.

It leaves out the reality of the human user entirely. And the reality is that people are generally (1) busy, and (2) lazy. Having to think is a switching cost.

Not to mention that the median savings balance in the US is $8,000. Are consumers going to re-learn how to bank in order to get $180 in annual after-tax interest income? Will they switch banks 3 times for 5 basis points?

Yes — there will definitely be a small subset of Instinct / Muse users who give their agents permission to move their assets between high APY accounts. That subset won’t be much bigger than the fintech nerds (me) today who do this manually. Perhaps the best evidence for this is the fact that MaxMyInterest has been around for a decade doing exactly this (automated interest-maximizing cash sweeps) and yet almost nobody uses it.

Just because you built it doesn’t mean they’ll come.

That said — there will be a new generation of young consumers who grow up with agents as their primary interface, just as there was a young generation that grew up on social media and Google search. Younger people won’t have to ‘unlearn’ their old manual banking habits. They won’t have the implicit distrust in agents that most older consumers have. That new generation is much more likely to ditch their banking relationship to let their agent put it on autopilot.

What I would be worried about, if I were a bank, is the reliable income streams I derive from consumer inattention. Retail banks have perfected the art of monetizing their users through late payment fees, overdraft fees, variable interest, and other easily-avoidable costs.

As LLMs let people better understand if they’re getting overcharged for credit, or notify them ahead of potential fees, banks won’t be able to depend on consumer inattention as reliably as they once did.

The ‘homo economicus’ doesn’t exist. Inertia is a switching cost.

In related news: Would you bank with your favorite OnlyFans influencer?

Bruno Werneck caught that Whop, a fascinating business that lets creators open their own businesses with a click, is now offering creators a way to open their own branded neobanks.

It's not exactly a bank account — the stack is built on Privy / CRB / Rain’s crypto products — but it’s close enough. The offering is basically Starbucks-card-as-a-service to let creators launch their own savings and reward programs.

Honestly…. I don’t hate it?

Sure, there will be a long tail of $1k AUM creator ‘banks’ that end up shutting down. What happens to funds / escheatment will be a bit of a mess to figure out, and these creators (and Whop) had better hope they’ve met KYC/AML requirements.

But I could see a Mr. Beast (or a Sophie Rain?) pulling this off successfully. If you can talk your fans out of $95M in subscription revenue, you can probably talk them into switching banks.

Maybe this is how broad consumer crypto adoption finally happens…. via OnlyFans Creators 🤝 Crypto Mullets.

(Won’t work on the agents though.)

- Nik

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See you on the internet 👋 - Nik