BankSimple Receives $10M in New Funding and Partners With Visa, Andera, Bancorp Bank and Others

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BankSimple announced a new round of VC funding, $10 million from IA Ventures, Shasta Ventures, and other existing investors.
The banking startup also announced partnerships with Finovate

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alums Visa and Andera, along with The Bancorp Bank, TxVia, Allpoint, and CBW Bank.
Andera’s press release reports that BankSimple,
“…will use the Application Risk Management and Funding Risk Management components of Andera’s software development kit (SDK) to power its online account opening process.”
BankSimple is readying for its launch later this year. Come see its first live demo at FinovateFall in New York next month where Andera will also be showcasing its new technology. Get your FinovateFall ticket here.

BankSimple Reveals 2 New Banking Partners: The Bancorp Bank and CBW Bank

image Yet-to-be-launched BankSimple scored more great press this month with a tease on the cover of the July/August issue of Fast Company:

The Zappos of Finance

The one-page profile in the magazine’s Next column (p. 32) is titled:

A Bank that Doesn’t Suck

For Netbanker readers, the article mostly covered familiar ground. However, there were two huge reveals near the end that I almost missed; two banks the startup is working with to power its services:

  • Bancorp Inc, a public holding company (TBBK) that powers 300 affinity banking programs around the country (note 1) which will likely power BankSimple debit cards among other things. Bancorp Bank EVP Pete Chiccino was quoted in the FastCompany article.
  • CBW Bank, a small privately held bank based in Weir, Kansas with just $6 million in deposits (note 2), which will likely hold BankSimple-gathered deposits.

BankSimple has a wait-list of 50,000 for beta invites. According to the article, 12,000 of those will be allowed in by year-end before its general-public launch in 2012.

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Notes:
1. The Bancorp is a Finovate sponsor
2. It took 119 years for the bank to get to $6 million in deposits for a net growth of $50,000 per year. They’ll get that much in the first 10 minutes after BankSimple opens its doors.

BankSimple’s Vision Statement is All About High-Touch

image Over the years I’ve published more than a million words and this is the first time I can remember using the term “vision statement,” and in a headline no less. I’ve spent enough time in large companies to know that when you hear “vision statement” it’s time to run for the exits. Usually, even the employees don’t buy it, let alone the customers it’s supposed to impress.

However, BankSimple’s vision statement is not only believable, but also sets a great tone for the startup’s upcoming launch. It’s also cleverly positioned on the homepage to “jump up” above the fold as you scroll down.

Why does it work? Everyone knows that BankSimple, with its Twitter DNA and $3 million in venture funding, will have good tech. So the startup focuses on people and service in its vision statement to make it clear that it’s not some aloof, high-tech company where it takes a search warrant to find the customer support number, but an actual human-powered organization (see details below). Nice touch (note 1).

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Breaking “the vision” down point by point
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It’s no surprise that the non-bank bank is tackling the fee issue. It’s in the news and it’s always high on the list of customer dissatisfaction. But notice they are not using the word “free” or saying “no fees.” They are just saying they will be transparent with pricing and will not surprise with penalty fees when you can least afford them.

 

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Everyone talks about service, so this isn’t particularly novel. But the use of “prioritize” and “real” will resonate with the segment they are targeting.

 

 

image Grabbing the mobile positioning is brilliant. That’s absolutely where the market is headed, so you might as well make it a key differentiator. And while no one knows what “true mobile banking” means, it sounds good.

 

 

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I’m not sure this adds a whole lot to the vision. In the text by this point, the bank talks about “plain, simple language.” Sounds OK, but not as compelling as the other points. I’d have nixed it and kept it to a tidy four-point vision instead.

 

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The tagline for this point is, “You’re a real person, not an account number.”

Bingo. Here’s a pure-play online bank run by uber-techies, but they are saying they are really all about the people. High tech. High touch. Love it!

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Note: Yes, I’m aware that BankSimple abbreviates to BS. And no, I’m not its biggest fanboy. See this self-proclaimed “love letter to Bank Simple.”

BankSimple May be First Invite-Only Retail Bank Launch

The Bank nightclub, Las VegasI’m not sure what BankSimple told investors, but it worked. The non-bank bank startup grabbed $3 million in VC money last week. The company is positioning itself as a tech company rather than a financial services provider, a smart move for valuations.

imageI finally caught up with co-founder Joshua Reich a few days ago. I came away from that conversation even more impressed. These guys are really trying to reshape the banking experience. They talk more like a credit union than a bank, meaning they are maximizing the customer experience instead of the shareholder one (see note 1).

Granted it hasn’t launched yet, but so far the “better experience” strategy is working wonderfully. The startup has a 20,000-person wait list for an account. Think about that, a waiting list…to join a bank. I never thought I’d write that sentence. If 75% convert to actual customers, BankSimple will have already hit its first-year goal. A nice problem to have.

Graphic from BankSimple website

And the beauty of so-called scarcity marketing is that you can use invite codes as a sort of virtual currency to reward existing customers and other influencers. BankSimple plans to use invite codes to encourage certain unspecified behaviors from existing customers. It’s a page out of the Silicon Valley playbook. Google kept Gmail invite-only for several years. There was a even a time where people paid real money on eBay for a Gmail invite. The same could happen at BankSimple.

Other things I learned:

  • 42% of its prospect base already uses Mint, so BankSimple is content to let someone else handle the heavy lifting in the aggregation space. At launch anyway, they will show activity only with direct BankSimple partners.
  • As previously reported, the bank is committed to mobile remote deposit. They’ve spent considerable time working the kinks out of that. They even looked at extending the concept to bill payment, allowing users to simply scan bills and have them automatically paid; however, too many tech problems surfaced, so the effort has been shelved.
  • Focused on real-time everything. They may be the first bank (at least in the United States) to have everything they do occur in real time. They think that will greatly reduce customer service headaches and expense.

Notes:
1. But clearly BankSimple is no nonprofit. The VCs are there because they smell a 10x return, not because they don’t like banking fees.
2. Photo credit: The Bank nightclub in Las Vegas.
3. Previous posts on BankSimple here.

BankSimple Provides Sneak Peek of User Interface on iPad App

imageThe bank that everyone’s talking about, and no one is using, finally released a few peeks at its user interface. Based on these screenshots posted on the bank’s homepage (see last screenshot), it looks like a killer iPad app (note iPad logo in upper left of first screenshot).

image The startup also unveiled a new logo, moving from the trendy gray/red (left) to a bolder font in a very bank-like and comforting blue.

Finally, the startup has purchased the .com version of their URL, an important, albeit expensive, pre-launch move. Currently, banksimple.com redirects to the old .net version.

Screenshots

1. Safe-to-spend balance appears to incorporate future scheduled payments and displays goals to help users keep the bigger picture in mind, rather than spending the $1,208 on drinks and dinner out.

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2. The bank’s customer service focus illustrated in chat screen with co-founder Alex Payne. On the right you can get a glimpse of the transaction flow.

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3. My favorite screenshot. It indicates the bank will use out-of-band authentication, a must-have these days. It also demonstrates that BankSimple is really thinking through the UI. Instead of tiny little digits requiring reading glasses, the bank provides the 5-digit code in big, bold numbers. They are also rendered in an attractive flipboard style.

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Note: HT to Keith Caswell @kthcswll for the tip.

BankSimple Scores More Press

image In the history of online banking, has there ever been so many words written about a company before it’s even opened for business? I can’t think of any.

It’s a two-edged sword. Free publicity is great for building a brand. But it can also ratchet expectations up so high that delivering the goods becomes harder.

The BankSimple team is keeping things low-key on its website. You even have to search a bit to figure out how to get on its mail list (see note 1). But some of the press accounts are downright giddy over the yet-to-be-launched-nonbank bank (note 2).

image Case in point: Friday’s Mashable post which generated 1,000 Tweets, 365 likes, 33 comments, and eight Diggs. The author, Jennifer Van Grove gushes about BankSimple, using terms usually reserved for a new Apple i-something launch:

The Banksimple formula is one that puts customers first and focuses on automatic, “worry-free” money management with a digital twist and penchant for social integration.

…the startup’s bleeding-edge approach to banking that we predict will be both controversial and groundbreaking.

And these were the subheads in the article:

  • A New Way to Bank
  • Predictive Money Management
  • Social Media Meets Banking
  • Fee-Free for Real
  • The Zappos of Banks

But after all that setup, the reader comments were predominantly skeptical/negative. I think it all sounded a little too good to be true.

Relevance to Netbankers: Despite the skeptical Mashable comment thread, there is a real appetite in the country (world?) for fresh ideas in the banking sector. But there’s also huge trust hurdles for financial startups. BankSimple is planning a hybrid model. A Web-based, social-media-loving startup running on the banking rails (note 3). It worked for PayPal. It will work again (note 4).

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Notes:
1. Prospective customers must first click on the Join tab on the far right of homepage. Users are asked for their email address (obviously) and something I’ve not seen before, their bank balance. Maybe it’s just me, but that seems a little too forward for a beta invite page and may dissuade some from leaving their name. Also, it seems just a bit out of step with the bank’s populist message. Not a big deal.
2. And given that this is our third post on BankSimple, I guess we are in that category as well.
3. We’ve written about this theme many times over the years; the last time we published a full report was almost ten years ago: Online Banking Report: Building the Amazon.com of Financial Services.
4. This is a general statement. Until I understand what it’s doing, I’m not predicting anything about BankSimple, other than it will get a lot more press.

Lifehacker, Bank Technology News Spread the BankSimple Meme

imageBankSimple has already become well known among the digerati and its notoriety is spreading to the mainstream press (here and here). Bank Simple’s latest PR coup was being named Tuesday to the Bank Technology News annual top-20 innovators list (see note 1).

Quite a feat for a company that hasn’t yet launched or even shown its service outside a small group of testers (note 2).

Lifehacker Asks, “Are you happy with your bank?”
Lifehacker, a popular blog (note 3) that deals with personal productivity and other minutiae of day-to-day living, positioned the BankSimple story as a backlash against traditional banks in a post titled, “Are You Happy with Your Bank?”

imageAfter a few speculative paragraphs about Bank Simple, the blog concluded with a quick poll to see how motivated its readers were to switch banks. I expected this self-selected sample to be very anti-bank. But surprisingly, more than half the 3900 voters declared themselves relatively satisfied with their bank. Only 13% said they were unhappy and another 30% said they’d consider consider switching.

Given the sample bias, you can’t read too much into the the data. But it does demonstrate that even in a worst-case polling situation — where participants are pre-conditioned with a vision of a utopian entity that does everything right with nary a fee — it’s still difficult to budge consumers away from their existing bank/credit union.

Notes:
1. Four recent Finovate alums were also listed: Backbase, CashEdge, Intuit, and Segmint (see our Finovate blog post yesterday).
2. If you read all the published articles, a fairly thorough picture of Bank Simple emerges. It will not be a bank, but a simple web 2.0 interface (e.g., Twitter/Tumblr) on top of a checking account (e.g., what PayPal did for online payments ten years ago).
3. According to Compete, Lifehacker averages about 1.2 to 1.5 million unique U.S. visitors each month.

Complexity in Financial Services: Can We Really Bank Simple?

Financial confusion Despite the best intentions of governments worldwide, does anyone really believe that consumer financial services will become simpler anytime soon?

Yet, I’ve been intrigued by Bank Simple and apparently, so have many others. Evidently, Twitter/Square founder Jack Dorsey and TechCrunch founder Michael Arrington talked about Bank Simple on stage at the TechCrunch Disrupt conference this week.

While most articles are hopeful, first-mover skeptics have already posted counterpoints to the startup’s “motherhood and apple pie” messaging (make sure you read the comments on Ron Shevlin’s post).

I can’t remember any financial entity, other than those with celebrity founders (Square, Revolution Money, Virgin Money) receiving this much attention before it even launched (note 1).

imageI still don’t know exactly what Bank Simple will offer. Certainly, they have a great name and a positioning that’s right for the times. But can they live up to it? Basic banking really is pretty simple. You deposit some cash, earn some interest, then take it out and give it someone else. Rinse. Repeat.

Innovation often creates complexity
Banking got complicated only when new features were introduced. People got tired of going to the bank, pulling cash out of the vault, and hauling it around to pay people. So checks were invented. Payment became much easier, and personal security greatly enhanced. And as a nice by-product, the returned check was the first PFM tool, serving as a handy authenticated record of who was paid for what, when.

That worked great for a couple generations, but then too many people wrote too many bad checks and it started to become a slow and cumbersome process to identify yourself at the point of sale. So debit cards came along to speed the purchasing process, fight fraud, and return some fee income to the issuing banks (note 2). And the electronic records of merchant name and SIC code made record keeping even easier, originally on paper statements and now online.

Those two innovations, checks and debit cards, really helped consumers save time and hassle. But did they make finances simpler? Not really. Those payment services led to NSF/overdraft fees, PIN vs. signature decisions, card authorizations, check-hold times, float, authorization holds, chargebacks, annual fees, check-printing fees, positive pay, reverse positive pay, remote deposit capture, mobile remote deposit capture, Quicken, My Spending Report, Mint, interchange regulation. The list goes on and on.

It may not be simple, but no one (except visitors to this UAE hotel) is going back to carrying gold nuggets to the general store to buy crackers out of a barrel.

Technology MIGHT be the answer
Technology advances often bring wonderful, sometimes life-altering, benefits (think electricity or water purification), but often at a cost of increased complexity. As much as I love, love, love the Internet, it’s not known for its overall ease of use.

But there’s a glimmer of hope on the horizon, and you are carrying it in your purse, pocket, or briefcase.

The smartphone.

I’m still amazed at my iPhone after more than 2.5 years of continual use (note 3). It’s the one and only device I’ve owned that makes life better AND simpler, albeit at a hefty monthly fee.

And I believe mobile apps will ultimately make banking better AND simpler. Why?

  • The phone knows who you are and where you are, vastly simplifying authentication at the point of sale and reducing fraud significantly.
  • The phone (via real-time links to the bank and retailer) knows exactly how much money you have and what you are buying, virtually eliminating overdrafts and unknowingly overspending.
  • The phone can provide an instant, secure way to pay any person or any business, with immediate settlement.
  • The phone has built-in scanning capabilities for depositing checks, capturing receipts, documenting insurance claims, etc.
  • The phone has access to every database on the planet to assist in shopping, evaluating, financing, insuring and closing any deal for any thing.
  • And if you have a question about any of the above, just speak into the device and you’ll get an answer in moments via voice recognition self-service.

So yes, there is hope for banking/financial simplification, and I think it will almost exclusively come through mobile apps with the occasional visit to an online mission control (note 4). So if you want to compete with Bank Simple, or Bank of America for that matter, get cracking on your mobile strategy (note 5).

Notes:
1. Now that Twitter’s Alex Payne has been added as a co-founder, Bank Simple could probably be classified as a celebrity-founded company.
2. I’m still using my first-gen phone bought in Oct. 2007. The battery is still very strong, the touch-screen virtually unmarked, system performance seems unchanged, and it only crashes a couple times every year despite being carried, set down, and tucked away day in and day out.
3. This is a vast oversimplification of the move to debit cards, but the point is they disrupted checks at the point of sale.
4. If you are still unconvinced that mobile will overtake online for banking tasks, here’s a thought:  Consider how often you go online now to check the local weather. A waste of time — right? — when all you have to do is press a button on your smartphone. The same near-instant response will happen for basic banking info.
5. In our Online Banking Report, we’ve published several reports on mobile banking strategies.