BankSimple, the highly anticipated web-only bank being built with an emphasis on user experience and no fees, is getting closer to launching, the company said today. CEO Joshua Reich put up a blog post this afternoon announcing that BankSimple has secured partnerships with VISA, Barcorp and other institutions to enable its customers to get transaction rewards and have their deposits FDIC insured. Additionally, the company announced that it has grown its venture capital war-chest from $3.1 million to $13.1 million. The company is testing its products now and says it will launch within the year.
In announcing supporting partnerships with more traditional banking institutions, Reich emphasized that the company carefully selected partners that shared its opposition to surprise fees and that support “modern real-time systems that enable deep connectivity with the BankSimple platform.” That’s key to understanding the true nature of BankSimple’s aims.
Joshua Reich lead several data-intensive high tech startups before co-founding BankSimple in 2009. The company was founded on a desire to combine real-time data, strong user experience, design and customer service and an app-platform type approach. The company made a big splash when it hired Alex Payne, the original leader of the Twitter developer platform. Last Summer, BankSimple opened up a public discussion about its app platform and what could be done with it.
Ideas discussed included things like using the company’s mobile app to annotate transactions while still inside stores (for categorization and analysis), the creation of subaccounts, of course off-site 3rd party personal finance apps tied to a user’s bank account and more.
Reich says that many of his competitors are thinking about remaking banking only as deep as a thin layer of visual interface. “They don’t do anything that fixes the foundation of the bank,” he says.
“These banks are built on decades-old batch processing systems. They may improve the appearance, but it’s not improving the fidelity of the data. Customers have a lot of questions about their data and banks make it hard to answer those questions because of things like a lack of real time data and annotation.
“When you swipe a card at the store today, the merchant sends a message through the Visa or Mastercard network and it arrives at your bank within a second with up to 120 fields of information included. They know your location, which terminal of a store you’re in, whether you’re in the pharmacy section of a Walmart or the register section. They know what category of transaction it is. They have a hugely rich corpus of information about every transaction and they just throw it out. All the bank cares about from a balance perspective is whether the transaction can be paid for.
“This was all designed when storage was expensive and real time processing wasn’t the norm. We [BankSimple] keep all that information; storage is cheap and we do it all in real time. We correlate things with Simplegeo so we know what kind of store it is. We have really powerful search, all fast because it’s done browser side. You can say coffee last week in New York and see all the maps and all the details like how much you spent on coffee vs lunch that week. All this information makes people feel less anxious about their money.”
Right: BankSimple CEO Josh Reich. Prior to co-founding BankSimple, Reich ran a think tank focused on “basic research that develops fundamental models for understanding the environment in which a firm operates and how to question the unknown.”
Reich says that while some big banks are talking about far-out ideas like 3D bank statements, his company is focusing on the basics of User Experience design, typography and making it easy to leverage feedback loops with your purchasing data.
“People turn to tools like Quicken, Mint or Wesabe because they have questions about their money – but there are huge barriers to getting those working right,” he says. “So you’ll only ask really important questions at times like like tax season. But on some random Thursday, you might be curious about something. If you know how difficult it is to ask that question – you won’t. As a result, people have all these unanswered questions and that just makes them more anxious about their money.”
Demand for Change
Market conditions for such innovation appear favorable. A small majority of bank customers feel good about their banks – but they don’t like their websites or off-line branches. The 8th annual World Retail Banking Report from Capgemini this year, for example, found that 59% of surveyed banking customers in 25 countries are satisfied with the banks they use. United States banking customers were the most satisfied in the world.
Globally, only 35% of banking customers reported positive or very positive customer experiences, in braches and online for example. In the US that number was 53%.
Analyst firm Gartner said last year that traditional online banking faces a serious challenge from a new class of service providers focused on more advanced financial operations than mere transactions. “Most bank offerings have limited forecasting and analytical tools and don’t cleanly support multiple bank relationships,” says Gartner’s Douglas McKibben. Traditional banks need “a wake-up call,” McKibben wrote, “regarding the need for responsive, personalized customer applications.” “In the longer term, the concept of a proprietary online commercial banking platform will be obsolete,” McKibben wrote in a related report with Stessa Cohen, “and banks will only orchestrate and not control access to services and information.”
It seems that there is a lot of opportunity, then, to use the web to deliver a more satisfactory customer experience. BankSimple aims to take real-time technology, an emphasis on user experience and a customer-centric refusal of fee madness into the fight.
The company’s hand got a lot stronger with today’s news.
