This is very intelligently done. I'm glad they are releasing the cards to just a small set of people first to check that everything works. People are very wary of any issues with their money/with their bank and absolutely any problem at the beginning would seriously hurt user adoption. Start slow and make sure it works.
As I understand it, banks make a large amount of revenues from fees and such. How will BankSimple succeed if it doesn't use that? How will overdrafts work? Will the check just not go through?
I love that they are trying to revolutionize the banking industry, and I wish them well. But I'm afraid that they'll succumb to adverse selection to the greatest degree. The reality is that most of a bank's customers are not profitable (without the fees), which is why they institute these ridiculous fees to either drive them off or make them profitable. If BankSimple can make these previously-unprofitable people profitable again without surprise fees, they'll be a great success.
"Odd as it might sound, we tell startups that they should try to make as little money as possible. If you can figure out a way to turn a billion dollar industry into a fifty million dollar industry, so much the better, if all fifty million go to you. Though indeed, making things cheaper often turns out to generate more money in the end, just as automating things often turns out to generate more jobs." - Paul Graham
As I've posted below, it's going to be a bit tough for them.
However, while traditional banks make a lot of revenue from fees and such, traditional banks also have a lot of costs. Traditional banks have very large staffs that BankSimple won't have, traditional banks have lots of real-estate that BankSimple won't have, etc.
So, there is the potential that BankSimple is cutting out the fee revenue, but they're also cutting out a lot of the costs and that they'll offset (or it'll be enough that they can succeed, even if succeed with lower than average profit margins for the banking industry).
I'm also guessing that online banks get a higher percentage of their clients from the no-fee club. There are already e-banking divisions of many banks that offer higher rates, ATM reimbursements, etc. So, there's some wiggle room there.
It will be difficult, but they're going for it. Again, I'm skeptical. There are a number of e-banks that offer better terms than physical banks, but haven't quite gone all the way on no-fee. It isn't a sector where there aren't competitors already. So, BankSimple is going to have its work cut out for it.
The 1.5% they get from every single credit (and debit) card transaction as the issuing bank. I also understand that they'll have no branch locations. My local credit union has no fee checking and savings accounts, and in the years of using them they have only given me fees for the occasional coverdraft and absolutely nothing else. Just like how netflix is usurping cable companies $100 bills for a $10 + Internet bill, they'll do just fine.
> How will overdrafts work? Will the check just not go through?
That's how it used to work, so sure, it's an option. A second option would be automatically taking the money out of your savings account, if available. A third option is, if you have a credit card with them, putting the overage on you your credit card. A fourth option would be to generate an automatic overage loan at a reasonable interest rate, without assessing a ridiculous fee.
Making money in banking is trivially easy. The big banks need to assess all sorts of fees to sustain their humongous and humongously unnecessary cost structures.
Pretty much every claim/assumption in this is wrong. Traditional banks make more money by adding fees, but they make plenty of money before fees, too. Interest and interchange revenue -- they are things.
Anyone know the reason why? I'm not asking because the popcorn factor but rather to understand if there's something fundamentally broken about the concept & company.
In some ways, they're over-reaching. Sure, people hate the banks right now and it seems like a cash-cow industry that one could really disrupt. However, banking has a lot of competitors including not-for-profit ones in the form of credit unions. It will be very difficult to offer higher rates, better service, etc. than a non-profit credit union while one is trying to make a profit.
However, if I were BankSimple and you said what you and I have said to me, I'd respond that banks are crap at IT. I'd say that we (BankSimple) are basically a better IT department for your bank. We're going to create a banking technology stack that you'll enjoy using while getting you better rates than the large banks (BofA, Chase, etc.) offer you and better terms (like ATM refunds). We're going to do this by using wholesale banking offers from FDIC-insured institutions.
Will it work? Maybe. I'm skeptical. Refunding ATM fees and better terms are going to eat into margins a lot. The wholesale bank is going to take their margin. That doesn't leave much for good rates. Plus, some banks are starting to get good at IT. Wells Fargo and Bank of America have deposit-scanning ATMs. Chase has an iPhone app that lets you scan checks. When it comes to terms, I already have a bank that offers me 0.55% checking and 1.25% savings with ATM refunds.
It isn't an easy road for them, but what they're trying to do is create a better technology package for users. That might mean making a card that can do both credit and debit in one card - I've wanted that. That might mean NFC payments faster than banks will support them. That might mean better Mint.com-like tools than Mint. That might be the plainer, easier to understand language they're pushing.
And, even if they don't completely succeed with a retail venture, they might end up with a great OEM package for banks and credit unions to outsource their web and mobile technology stack to. Most small banks do outsource their interfaces and BankSimple might be creating the best OEM package for small banks (if/when their retail ventures fail) inadvertently in the process. I've seen plenty of banks with horrid web interfaces and very few allow for check scanning on either desktop or mobile. BankSimple could do well in the OEM market even if it fails to convince consumers of its retail ambitions.
/just to clarify, I'm not affiliated with BankSimple, it was just a pleasant way of phrasing that paragraph.
Right, there are already good alternatives to consumer-hostile banks, such as the fantastic Charles Schwab.
I always recommend them to people because they pay my banking fees, are insured, ethical/reputable, pioneered the discount brokerage, and have great 24/7 customer service. They've helped me out of numerous jams over the years.
I've always wondered why after winning something (or in this case, getting 50k sign ups), people say "I'm humbled." I think the truth would be the opposite: "Wow, looks like I'm pretty awesome after all."
Success (like getting a startup off the ground) takes a lot more than just personal skill/intelligence/hardwork- there's fortunate timing and circumstances, the hardwork and contributions of others, time and monetary investment of others, plain old chance luck. Recognizing that some part your achievements depended on others and things beyond your control both requires humility and can humble you.
That's not a bad state of mind, and it doesn't have to be just false modesty.
BankSimple sound interesting but they will have to be offering something really awesome for me to even remotely consider doing business with a commercial bank ever again. (There days, I only deal with credit unions.)
They themselves aren't a bank. They partner up with banks that provide FDIC insured products. They just provide the customer service and the user interface.
In traditional banking, UX is an afterthought but from what I see, for BankSimple, banking takes the backseat but UX rules. I say this coz there's no details on FDIC, interest rates, etc.
IMO, instead of doing Banking; they can sell their product to banks
"BankSimple account plus BankSimple debit card replaces your existing personal bank account. Make deposits, withdraw cash, pay bills, earn interest, and more.
However, BankSimple is not a "bank." We partner with chartered banks who provide FDIC-insured products, leaving us free to concentrate on designing the complete consumer banking experience, via the web and your smartphone.
"
This sounds great. Props to them if they can disrupt banking.
The fact that they're not a real bank but some entity that works with partners to provide FDIC insured products is reassuring from a customer point of view. Not sure about how they will do their marketing though.
Now, I hope that we, non-American customers, won't have to wait too long for this service.
I'm pulling for BankSimple's success thanks to the abysmal nature of banking customer service. Hidden fees, long wait times on phone calls, ATM fees, ridiculous procedures to dispute charges...
With that said, how is BankSimple anything but a middleman? In my eyes, they fill one of two potential roles:
1. They're a customer service wrapper for banks, which means banks pay them to provide support. So banks are their customers, right?
2. They actually manage your money for you---a "broker for personal accounts." How do they generate revenue in this case?
#1 and #2 are both problematic. In a way, I'm the opposite of Aloisius: I clearly see BankSimple's benefits (Mint + support + SmartyPig), but I cannot understand how they will generate revenue while staying loyal to customers.
1. We're more than a "customer service wrapper". We don't license our technology or outsource our support staff to other banks. Banks are our partners, not our customers, and we only partner with a small number of banks who share our values and are willing to set aside things like fee revenue to work with us. We have a symbiotic relationship with those banking partners: we bring them deposits, and they make loans on those deposits and share the resulting interest margin with us. That is one of several sources of revenue for us, but not our sole source of revenue.
2. If customers like the way we help manage their money, we're able to connect them to a variety of financial products that are mutually beneficial to our customers, our banking partners, and to us. As above, our banking partners are happy because we're bringing them new customers for various financial products, many of which have a decent margin on them (CDs, for example). We share that margin with our partners, and that's another source of revenue.
Our business is all about aligning the interests of the banking industry with the interests of our customers. Where we can create that alignment, we profit.
I've had a very different experience with customer service.
I was able to do a lot of things like dispute charges, change address, and get information very easily on the phone with less than outlandish waiting times.
And I never incurred ATM fees either by using ATM's from my bank or just by using a credit card when I didn't have any cash.
The only real advantage I'd want is more ATM availability and higher interest rates. Otherwise, I can't say I've had that bad of an experience with a bank.
So, this prob isn't the place, but instead of cards or short range radio, I thought plugging into headphone jacks and having the phone do transactions (akin to what short range radio would do). Doesn't require any modification to phone and is backwards compatible with almost all phones (that have their won sdk (Symbian, iOS, Android, RIM) or use J2ME or BREW.
I wouldn't be able to bring this up myself (I just do code, hardware and banking is beyond me at times), but I would never object to being included with people who could:-D
Anyway, ::shrug::, just thought I'd place the idea out there since I feel it's good and like to see someone do it.
What's the big deal about BankSimple? They look about the same as most credit unions. My credit union has a good website & iPhone app, and doesn't charge hidden fees. They pay interest on my checking account.
Is it just me or does it seem sort of odd that they don't mention the FDIC anywhere on the page (whether they will be insured) You can't advertise that you will be FDIC insured?
> Yes, all deposits will be insured to the FDIC limit (currently $250,000) through our partner banks at launch, just like with any other major bank (or credit union through the NCUA). FDIC insurance guarantees the safety of your deposits.
I think BankSimple is going to struggle to find customers with its current proposition. The fact is that people are not as unhappy with their banks' fees, customer support or websites as BankSimple thinks (or at least suggests). People like branches and brands. The one thing people do like is products which is how ING broke into the business but an approach that BankSimple appears not to be pursuing.
I am surprised that so many people are willing to open a bank account with someone you've never heard of.
I couldn't even find if they are FDIC insured.
I know several friends who wouldn't use mint.com.
For them, it is a single point of failure. You can explain all the technical details you want but there is no way to get past their fears.
When shit hits the fan, you can expect the US govt. to bail out Bank Of America. SimpleBank? I am not so sure.
[+] [-] meterplech|15 years ago|reply
[+] [-] foobarbazetc|15 years ago|reply
[+] [-] orijing|15 years ago|reply
I love that they are trying to revolutionize the banking industry, and I wish them well. But I'm afraid that they'll succumb to adverse selection to the greatest degree. The reality is that most of a bank's customers are not profitable (without the fees), which is why they institute these ridiculous fees to either drive them off or make them profitable. If BankSimple can make these previously-unprofitable people profitable again without surprise fees, they'll be a great success.
Let's hope that happens.
[+] [-] olalonde|15 years ago|reply
http://www.paulgraham.com/web20.html
[+] [-] mdasen|15 years ago|reply
However, while traditional banks make a lot of revenue from fees and such, traditional banks also have a lot of costs. Traditional banks have very large staffs that BankSimple won't have, traditional banks have lots of real-estate that BankSimple won't have, etc.
So, there is the potential that BankSimple is cutting out the fee revenue, but they're also cutting out a lot of the costs and that they'll offset (or it'll be enough that they can succeed, even if succeed with lower than average profit margins for the banking industry).
I'm also guessing that online banks get a higher percentage of their clients from the no-fee club. There are already e-banking divisions of many banks that offer higher rates, ATM reimbursements, etc. So, there's some wiggle room there.
It will be difficult, but they're going for it. Again, I'm skeptical. There are a number of e-banks that offer better terms than physical banks, but haven't quite gone all the way on no-fee. It isn't a sector where there aren't competitors already. So, BankSimple is going to have its work cut out for it.
[+] [-] mahyarm|15 years ago|reply
[+] [-] allwein|15 years ago|reply
That's how it used to work, so sure, it's an option. A second option would be automatically taking the money out of your savings account, if available. A third option is, if you have a credit card with them, putting the overage on you your credit card. A fourth option would be to generate an automatic overage loan at a reasonable interest rate, without assessing a ridiculous fee.
[+] [-] richcollins|15 years ago|reply
[+] [-] pbreit|15 years ago|reply
[+] [-] oof|15 years ago|reply
[+] [-] paulitex|15 years ago|reply
[+] [-] newman314|15 years ago|reply
[+] [-] Lewisham|15 years ago|reply
[+] [-] xbryanx|15 years ago|reply
[+] [-] Aloisius|15 years ago|reply
[+] [-] mdasen|15 years ago|reply
However, if I were BankSimple and you said what you and I have said to me, I'd respond that banks are crap at IT. I'd say that we (BankSimple) are basically a better IT department for your bank. We're going to create a banking technology stack that you'll enjoy using while getting you better rates than the large banks (BofA, Chase, etc.) offer you and better terms (like ATM refunds). We're going to do this by using wholesale banking offers from FDIC-insured institutions.
Will it work? Maybe. I'm skeptical. Refunding ATM fees and better terms are going to eat into margins a lot. The wholesale bank is going to take their margin. That doesn't leave much for good rates. Plus, some banks are starting to get good at IT. Wells Fargo and Bank of America have deposit-scanning ATMs. Chase has an iPhone app that lets you scan checks. When it comes to terms, I already have a bank that offers me 0.55% checking and 1.25% savings with ATM refunds.
It isn't an easy road for them, but what they're trying to do is create a better technology package for users. That might mean making a card that can do both credit and debit in one card - I've wanted that. That might mean NFC payments faster than banks will support them. That might mean better Mint.com-like tools than Mint. That might be the plainer, easier to understand language they're pushing.
And, even if they don't completely succeed with a retail venture, they might end up with a great OEM package for banks and credit unions to outsource their web and mobile technology stack to. Most small banks do outsource their interfaces and BankSimple might be creating the best OEM package for small banks (if/when their retail ventures fail) inadvertently in the process. I've seen plenty of banks with horrid web interfaces and very few allow for check scanning on either desktop or mobile. BankSimple could do well in the OEM market even if it fails to convince consumers of its retail ambitions.
/just to clarify, I'm not affiliated with BankSimple, it was just a pleasant way of phrasing that paragraph.
[+] [-] mixmastamyk|15 years ago|reply
I always recommend them to people because they pay my banking fees, are insured, ethical/reputable, pioneered the discount brokerage, and have great 24/7 customer service. They've helped me out of numerous jams over the years.
[+] [-] WettowelReactor|15 years ago|reply
[+] [-] olivercameron|15 years ago|reply
In short, no surprise fee's and simple online banking (with extensive mobile support).
[+] [-] olalonde|15 years ago|reply
[+] [-] known|15 years ago|reply
[+] [-] steve_b|15 years ago|reply
[+] [-] edash|15 years ago|reply
[+] [-] ronnoch|15 years ago|reply
[+] [-] brianpan|15 years ago|reply
That's not a bad state of mind, and it doesn't have to be just false modesty.
[+] [-] lurker14|15 years ago|reply
Original: http://www.jewishsightseeing.com/jewish_humor/punchlines_and...
[+] [-] RexRollman|15 years ago|reply
[+] [-] jonprins|15 years ago|reply
[+] [-] cagenut|15 years ago|reply
[+] [-] pbreit|15 years ago|reply
[+] [-] bluegene|15 years ago|reply
[+] [-] gonehome|15 years ago|reply
However, BankSimple is not a "bank." We partner with chartered banks who provide FDIC-insured products, leaving us free to concentrate on designing the complete consumer banking experience, via the web and your smartphone. "
[+] [-] olivercameron|15 years ago|reply
[+] [-] uniclaude|15 years ago|reply
[+] [-] Aloisius|15 years ago|reply
[+] [-] achompas|15 years ago|reply
With that said, how is BankSimple anything but a middleman? In my eyes, they fill one of two potential roles:
1. They're a customer service wrapper for banks, which means banks pay them to provide support. So banks are their customers, right?
2. They actually manage your money for you---a "broker for personal accounts." How do they generate revenue in this case?
#1 and #2 are both problematic. In a way, I'm the opposite of Aloisius: I clearly see BankSimple's benefits (Mint + support + SmartyPig), but I cannot understand how they will generate revenue while staying loyal to customers.
[+] [-] al3x|15 years ago|reply
1. We're more than a "customer service wrapper". We don't license our technology or outsource our support staff to other banks. Banks are our partners, not our customers, and we only partner with a small number of banks who share our values and are willing to set aside things like fee revenue to work with us. We have a symbiotic relationship with those banking partners: we bring them deposits, and they make loans on those deposits and share the resulting interest margin with us. That is one of several sources of revenue for us, but not our sole source of revenue.
2. If customers like the way we help manage their money, we're able to connect them to a variety of financial products that are mutually beneficial to our customers, our banking partners, and to us. As above, our banking partners are happy because we're bringing them new customers for various financial products, many of which have a decent margin on them (CDs, for example). We share that margin with our partners, and that's another source of revenue.
Our business is all about aligning the interests of the banking industry with the interests of our customers. Where we can create that alignment, we profit.
[+] [-] thomasgerbe|15 years ago|reply
I was able to do a lot of things like dispute charges, change address, and get information very easily on the phone with less than outlandish waiting times.
And I never incurred ATM fees either by using ATM's from my bank or just by using a credit card when I didn't have any cash.
The only real advantage I'd want is more ATM availability and higher interest rates. Otherwise, I can't say I've had that bad of an experience with a bank.
[+] [-] jrockway|15 years ago|reply
By skimming off a percentage of the interest your money is earning in their institutional account.
[+] [-] jimktrains2|15 years ago|reply
I wouldn't be able to bring this up myself (I just do code, hardware and banking is beyond me at times), but I would never object to being included with people who could:-D
Anyway, ::shrug::, just thought I'd place the idea out there since I feel it's good and like to see someone do it.
[+] [-] oofabz|15 years ago|reply
[+] [-] zitterbewegung|15 years ago|reply
[+] [-] eridius|15 years ago|reply
> Will my deposits be insured by the FDIC?
> Yes, all deposits will be insured to the FDIC limit (currently $250,000) through our partner banks at launch, just like with any other major bank (or credit union through the NCUA). FDIC insurance guarantees the safety of your deposits.
[+] [-] pbreit|15 years ago|reply
[+] [-] pbreit|15 years ago|reply
[+] [-] strlen|15 years ago|reply
[+] [-] evo_9|15 years ago|reply
[+] [-] truthseeker|15 years ago|reply
I know several friends who wouldn't use mint.com. For them, it is a single point of failure. You can explain all the technical details you want but there is no way to get past their fears.
When shit hits the fan, you can expect the US govt. to bail out Bank Of America. SimpleBank? I am not so sure.
[+] [-] joshfraser|15 years ago|reply
[+] [-] DanI-S|15 years ago|reply