That's not a bank?
So, what’s the deal... are you really a bank?
We are not a bank. We work with partner banks (soon to be announced) to provide FDIC insured products. What this means for you is that your money is safely insured with our partners. Our wholesale partners provide the financial products, we provide the customer service and experience.
There's a big difference between that and congratulating people for something bleedingly obvious. Do you really expect them to start manufacturing these cards and rolling out their entire system which deals with people's money without testing the [bleep] out of it?
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.
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.
Interchange fees have been in the news a lot lately, but they're notoriously difficult to put an exact figure on because PIN-based debit incurs a flat per-transaction fee, while signature debit is generally percentage based, and varies with the merchant in question. (eg, Gas stations will pay less interchange than Best Buy or online merchants.)
When you see figures in news stories, there are a lot of assumptions going on behind the scenes; eg, they'll typically assume a $40 transaction, aggregate PIN and signature based debit, are based on broad-industry studies, &c.
There is also variation depending on what debit networks are being used. If you look at the back of your debit card (especially if it's from a smaller regional bank or CU), you'll see many more logos than just Mastercard or Visa.
I thought many places here (Canada) accepted debit but not credit because it was a fixed fee per transaction not a %
Debit cards issued by Visa or Mastercard and operating over those networks incur a lower fee than credit cards but follow the same interchange fee structure. Australian Visa interchange fees are here: http://bit.ly/visainterchangefees. Just incase anyone was interested. Whether or not these cards require a PIN or signature depends on whether they use the Chip-and-PIN system, which all new cards issued in Australia should.
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.
However, you definitely don't want to keep using that credit line. Interest rates are on the order of 120%/year.
I have a 2500 or 3K credit line attached to each account; if I overdraw my balance -- with a bill payment, ATM withdrawal, whatever -- the extra comes from the overdraft line of credit, and there aren't any fees. I even used to be able to transfer money from the overdraft credit line into my checking account using their online interface, but they've turned that off now.
I've never overdrawn for more than a few days (due to poor planning, generally), so it's a perfect safety net... I always hated those fees!
It's not quite the same as a normal credit card line, I suppose -- where if I pay off the balance at the next statement, I pay no interest -- but the interest has never been more than pocket change, so I haven't even bothered looking it up.
[edit: sorry; I intended to post this in response to a post replying to you, not your post]
To be clear: this is not the easiest business in the world to start, particularly given the slow-moving pace of the banking industry, regulatory burdens, etc. But we've been making substantial progress, and we have a growing team who do fantastic work.
You are, of course, free to be skeptical of how I present the state of our company because it's in my best interest to put a positive spin on things. That said, it's also in my best interest to be open, because we know that many of our early (potential) customers are coming from communities like this one, and building trust is critical for our success.
But be careful, Al3x. Being professional about these sorts of things generates almost no News Forum Karma, which as we all know is a critical resource for startup fund raising. I suggest you edit your post with a few tactical emoticons.
If anything your post has gotten me to trust your service significantly less, because it looks like you think you can get away with duping potential customers with some polite doublespeak.
Can you explain how it is you are being open when you did not in fact answer the question?
Allow me to put it bluntly: my reasons for leaving BankSimple are my business. I have no interest, reason, or obligation to tell you more than I have.
Pretty sure this is a popcorn topic and nothing more.
I have no idea that this happened, but people leave for reasons other than "the product sucks". In fact, I would guess that compensation and getting along with your coworkers are much bigger factors.
And, whatever, but don't try to pass it off as high-minded.
Jiminy. There are people coming off as jerks on this thread. Dave isn't one of them. I might be, but if so, I'm far from the only one.
This intense urge to turn every goddam thread into some soap opera --- no, I got that wrong, some lucha libre backstory --- is one of our worst habits, and the people who give a shit about HN discussions need to start calling it out.
This topic you want to talk about is none of your fucking business.
You may disagree, but that's my line of thinking on the subject.
This is just a nugget of drama small enough for people to get their nerdy little hands around and hacky-sack across HN. It doesn't help that Dave's someone a lot of people here know.
This isn't as big a deal as I'm making it sound, but I don't like arguments that insult our intelligence.
Either way, this is serious! I'm going to start on my "breaking news" blog post now!
Or, you know, they could be busy with work that's actually important.
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.
So much of the banking decision for me is based on how well the bank gets out of my way, low fees, and high interest rate. My current bank manages the last two perfectly well, has excellent customer service, and the few issues I have with the web presence are minor.
Josh mentioned that they won't be targeting the absolute rate chasers, but that they will be providing an experience that changes everything (my words, not his). I'm skeptical, but I've been surprised by plenty of other startups. I'm sure there's innovation to be had in the banking industry, I just don't know how much of a draw that innovation will end up being.
Unfortunately every time I look at their site I don't see much that I don't get out of my current bank and my email conversation with Josh was heavy on the criticism of my current bank but light on exactly WHAT they are doing wrong. So for now I'll have to ride the hype with everyone else and just see what comes out.
Credit unions generally have disproportionally high overhead due to their size, and their rates are not great lately because of the corporate CU collapse. CUs face 38 basis points of assessments for the next two years to pay for the corporate bailouts.
Only for small amounts. If the check is for a large amount (over $750? I'm not sure exactly what the limit is), the app will refuse to let you scan it in and tell you to go to a branch instead.
True, it'd be nicer to scan in the check (and not have the mail delay) but it's not a huge pain point for me to drop the envelope in the mail; so I haven't been to my bank's branch in 5 years.
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.
Do you mean Charles Schwab is the "good alternative" or the "consumer-hostile bank"?
And the Schwab checking account isn't half bad either.
It is now serviced by FIA Services, no longer available to new customers, and of course terms and conditions are subject to change. So far, nothing has changed, but still, the point is that this card was and is an anomaly.
Aside from that, it's identical.
And it doesn't change the fact that Schwab put together the terms of this card (certainly with the help of FIA) and that a more traditionally mainstream bank has not.
I also have the British Airways Chase card that literally has netted me a free Biz Class ticket to Europe. Very generous. But that's a signing bonus. If I were to keep this card as my daily-driver for a couple years Chase would make a lot more money off me than Schwab ever would've off the card that's now the "FIA Cash Rewards Visa"
Eligibility description here: https://www.usaa.com/inet/pages/why_choose_usaa_eligibility_...
In short, no surprise fee's and simple online banking (with extensive mobile support).
- The plain simple language bullet admits that of course there will always be legalese
- Real support. I've never had trouble at any hour getting a human being on the phone, empowered to deal with my issues. Facetiming or Skyping with my bank? I really don't see the point.
- Mobile from the ground up - Chase has great mobile apps that allow you to deposit checks by taking a photo. I believe other banks do as well and it seems like this will probably be pretty standard going forward.
- No fees. In four years I've been hit with a surprise fee once. It has been resolved.
"We provide access to the largest fee-free nationwide ATM network and our mobile app will locate an ATM closest to your current location." Not sure what that network is but is it more ATMs than Chase or BofA or Wells Fargo have?
That's gotta be Allpoint. They run nearly all of the non-bank ATMs (Think: 7/11, pharmacies, gas stations). ING Direct has the same deal: http://app.ingdirect.com/atmlocate/index.html
That's actually a significantly worse deal than the banks and credit unions that refund ATM fees (to a point) so you can use literally any ATM on any network.
2) just because you don't have those problems doesn't mean that others don't. in the past 4 years, i've probably hit upon each of those problems. perhaps they aren't enough of a pain point for me to switch away from my bank, but they're valid points nonetheless.
3) their ATM network is the largest because its any ATM (i believe, based on what i've read). use their card in any ATM and they waive all fees. this exists in some other cards already, though usually in a limited capacity (my HSBC card waives the first 3 ATM transaction fees iirc)
That's not a bad state of mind, and it doesn't have to be just false modesty.
BankSimple, not being terribly large, can't force the incumbents to play their game (like say, Apple could with AT&T to some degree - and they got lucky getting in with Cingular).
It will be interesting to see how this fares when the "financial service" supplier(s) starts yanking the chain.
And if they do have their chains yanked, they can switch their provider. It's not like banks have "coverage" to lock you in, like mobile networks.
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.
They know that once you get an upstart with lots of momentum, it could derail the racket they have going on right now.
Good luck to BankSimple... it'll be interesting to see how this turns out. For me, USAA is quite adequate for the time being.
With some help of legislators ;)
Besides which, currency and customer support are two very different pieces of a much larger pie. At best, currency is the "implementation detail" behind a much larger set of day-to-day usability concerns inherent in banking.
Savings, transfers(much faster than any bank transfer, I mean my bitcoin reaches it's destination before I can finish filling in the bank transfer forms), security. All there.
I don't need customer support when there's no problems. I've never had something so easy to use to buy on the internet before.
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.
That aside, I'm one more hoping you can bring some sanity, on behalf of the consumer, to this market.
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.
By skimming off a percentage of the interest your money is earning in their institutional account.
Alternatively, what kind of margin would they take off? 50 basis points? 100? Interest rates are already low, so a small cut right now looks very big to consumers.
EDIT: posts above suggest BankSimple will offer better rates than industry competitors. Where are the margins, then?
It's conceivable that a large institutional client would get even better rates than an individual ING Direct savings account, so there is plenty of money for BankSimple to skim off the top, as long as they have enough capital.
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.
> 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.
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.
"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."
Businesses contract out services all the time. In this case, BankSimple is using some established company to store your money. They just provide the web interface and someone to yell at when there is a problem.
The very first thing I did when I hit BankSimple.com was CTRL+F "FDIC". One tiny mention in a blog preview 2/3ds of the page down. That doesn't cut it.
It's BankSimple's job to inspire confidence in their offering. Their front page seems to spends more time talking in vague terms about how their service is going to be mobile centric, and how they're going to put me first. What their service is all about, and how it works -- the things I care about -- are buried and quite vague.