I read it as them hiding that from you for simplicity... you get this one interface and customer service which is wonderful, but to achieve this they are the proxy to your bank?
So... do they set up the bank accounts, or do you? Do you have the ability to go straight to your bank, or does Simple preclude that ability?
In this text:
> Simple is not a bank. Simple replaces your bank. We build the services and support you need to manage, understand, and automate your everyday spending and saving. Meanwhile, we integrate with chartered banks who manage your deposits in FDIC-insured products. We take care of you, our partner banks take care of your money, and jointly, we’ve designed a better financial experience.
I come out confused. Who has the money, can I go straight to them to get it?
That's the missing bit of clarity that would make me feel the love (trust).
Banking is a commodity product. Other than access to ATMs, customer service, and online banking there's not much difference between banks (other than rates & fees, of course).
Same goes for the customers, honestly. If the bank doesn't extend you credit anyway, its a "your money is green" situation.
Yet the marketplace is still inefficient, and they think they can make money by making it efficient.
To do so, Simple has defined a standard checking account, if you will. It has x% interest, y fees, etc. Since banks and customers are a commodity, Simple can then say "we have 10000 customers at this price. Any FDIC insured bank - do you want them?" and perform a reverse auction of sorts. Its very much like LendingTree or FeeFighters.
The obvious obstacle is the same with internet banking - what if I need to talk to someone or get money out of an ATM? You're not going to convince me a random bank in New Mexico is interchangeable with Wells Fargo when I need cash.
They are handling this objection by providing a front-end which standardizes the customer service, ATM access (they pay the fee so use whatever ATM), and online banking pieces, and hopefully that standard is high quality.
So you still have an account with XYZ bank in Nowhereville, USA, but you've got a nice front-end instead of a questionable online banking product/customer support. All XYZ bank does is hold your cash for you, and its insured anyway so they can't screw that piece up.
There are strict rules that govern how banks operate. As bad as that relationship may have gotten recently, there are some basic legally enforced assurances that I can take for granted in how banks will respond to requests about my money. If Simple is a middleman to this transaction, I no longer have those legal protections.
What happens to the deposits if Simple (the company) goes under?
EDIT: Yes, I know they are FDIC-insured. But inside accounts setup by Simple. Are those accounts also in Simple's name, or jointly setup? What could potentially happen then during the lawful unwinding of the company?
That's a good question. When you make a deposit how long does it (if ever) sit in Simples possession before being put int your FDIC insured account? This may not sound like a big deal, but if Simple were to go under this float would go under with them.
We work with partner banks who hold on to deposits. For all intents and purposes, you never have to think about who that partner bank is, but if you ever need to contact them directly, you'll know where your funds are.
Can you tell us which banks in particular will be holding the deposits? I ask because I am interested in your product, but I do not want to do business with any bank that repeatedly forecloses on houses for which it holds no mortgage, hires mercenaries to commit the crime of breaking and entering, has a chief underwriter who has testified "Defective mortgages increased during 2007 to over 80 percent of production," or has admitted to over 100,000 instances of perjury. As such I'd like to be certain that you aren't doing business with Bank of America, Wells Fargo, or Citigroup before I open an account.
Love where you're going with this; however, the trust level is just not high enough for me to move my funds from a credit union (becu.org for me) to your partner bank. Now if you could partner with them, or a similar credit union, that would be amazing.
So you're a metabank, and you provide mint like tools for analyzing expenses, paying bills, etc.. Then you provide better customer service or a better experience or something like that?
Do you plan to use customers leverage to get better terms with the actual banks? Like could you move all the accounts to another bank if it paid better interest or something like that? Do you take a cut of the action?
I don't understand who I call when a problem arises. Do I call you, the anonymous partner bank, or is it simply impossible to call somebody if I have an issue?
You call us if you have a problem or question. We'll let you know what bank your funds reside at, but you should never need to contact them. We have our own in-house customer relations staff.
Okay, so let's take a real situation that happened to me: an ATM debited my account $600, but only dispensed $300. In that situation, I call you, and what happens from there?
Thank you for taking the time to answer some of our questions on what is surely a busy day.
Does this mean you only find out where your funds are if you call and ask, or is there some page (probably hidden under an 'advanced options' panel I suppose) showing the underlying accounts and their balances, internal transfer transaction logs, etc?
I have no affiliation with Simple, but the relationship seems pretty straight forward. "Where" your money is becomes an abstraction. You hold an account with Simple, and are issued a Visa card with which you can access the funds in your account. Everything beyond that is transparent to you.
The accounts would technically be "in your name", since the funds are yours, but you never have to interface with the other bank, so it becomes a question of: do you want to know the technical specifics, or stick to what's pragmatic? Pragmatically, your account would be with Simple. Your money is in an FDIC insured depository bank, so you don't face any additional risk because of the "partner" distribution.
But pragmatically if they switch banks behind the scenes, that would usually require a hard credit pull every time it occurs. This would seem to hurt a person's credit score if that was what actually occurred (that's why the semantics are important).
Banking is an industry that is not nearly as simple as it seems. There is a difference between "you" walking in to a bank wishing to establish an account and a "partner" like Simple seeking to move depository funds between banks.
The bank pulls a credit check on you, the individual, to mitigate risk. A company like Simple would secure a bond or insurance to mitigate this risk for the partner bank, reducing the friction for a business critical action (moving partner banks).
Pragmatically, Simple wouldn't survive very long if every customer were hit with a hard credit pull every time Simple moved their funds. I'm not even sure that would be legal.
Sure. I would assume it would be very similar to the pre-screening credit card companies do (which does not negatively affect a person's credit); however, if you look at the common components of a person's FICO score, a number of factors _could_ be adversely affected depending on how these things are done (closing of revolving accounts, length of credit history, credit searches, etc.). People are asking questions because it's a complex subject...and while people want to believe they won't be adversely affected, that doesn't mean it won't happen. Simply due dilligence I think.
Maybe the definition of a hard credit pull should be changed? It discourages people from shopping for loans since you often cant get a real interest rate quote until that provider gets your credit rating themselves anyways.
Well...I think FICO scores should be revamped anyways, but if you're shopping for loans, from what I recall, you only get hit once per 30 days (as obviously if you're in the market for a loan, you shouldn't be negatively affected for every vendor you approach).
Fine, but if we're being pragmatic, then it's better to stay with BoA because they're the biggest and they're too big to be allowed to fail. Your money is safer with them than anywhere else.
I would be interested in knowing who the partners are so that I can assure myself that they are doing business in a way that differentiates them from the megabanks.
On a side note: I was onboard with the BankSimple idea when I thought they were building a bank, now, I'm not so sure. I think it's a good idea, but not a great idea.
Assumption alert: the account at the partner bank is in your name.
Your money must be in your name for it to get the FDIC's "$250,000 limit per depositor" insurance coverage. Having one big mattress with Simple's name on it would preclude your money being insured. Ergo, the account must be in your name.
I dont' think that's exactly true. There is such a thing as the CDARS program, which allows you to spread your money between accounts at multiple banks. Not sure what the limitations are on that, but I would be weary of assumptions on this.
If the money were not in my name, that would be deal killer.
It's per depositor per bank. Not per depositor period. Spreading your money across accounts at a single bank would not get you additional protection. Spreading your money across banks is how you protect more of your money.
hey al3x. thanks for the explanation. i had a read over the faq and i think it's still not too clear who would have the deposit. am i right in assuming that on opening an account my initial deposit would go to a specific bank partner, and i would be informed of who that partner was in case i ever wanted to approach them directly to access my deposit without your service?
This is a good example of why "we're not a bank" is more confusing than comforting. IMO Simple should just gloss over that part.
Edit: I would liken it to startups that are built on top of some cloud; I don't need to know that because ultimately I hold the startup responsible for their reliability/security, not their underlying provider.
If you bank with us, you're money resides in an FDIC-insured bank account. You have the account and routing numbers and can transfer funds in or out at any time. We try to make banking anything but "scary" :)
Sweeping the technical details under a rug is what is making this scary. Many people may not care, but it would be very comforting to those that do if you had a document somewhere that explained exactly, in gory detail, where and how BankSimple fits in between the customer and the bank.
USAA is an outlier in terms of banking interfaces. I've had accounts with several banks, and so far none has beat USAA in terms of web interface, customer support, and consumer friendly features like free ATM withdrawals from wherever. In fact, when I transfer from my brick and mortar bank to USAA, they grant me use of the funds immediately. I know they haven't collected the funds yet, but they let me use them so there is no "limbo" where nobody really has my money.
Simple would do well to match USAA's service, but in reality they are competing with the BofA's, Chase's, and WF's of the world, and beating them on service shouldn't be too difficult. I think Simple is a step between your bank's actual web interface and a service like Mint.com. It's certainly a gap in the market. The question remains "is there a market in the gap?"
Most banks do use "glorified IT systems". Very few of them develop their technology in-house.
Think about it this way: you can have a bank that buys their technology from another company, or you can have a technology, design, and customer service company that partners with banks. Both are viable options, but I think our approach is going to better for retail banking customers in the long run.
As a customer, I'd feel a lot more comfortable if you worked solely as a technology vendor to my bank.
This isn't a knock on the team you're putting together, or your ability to build a great company. It's caused by the realities associated with venture capital.
Now that you took VC money, there's countdown to an exit, and I have to think about likely buyers. If you're successful, one of the top possibilities is a strategic acquisition from a major bank. This basically means that if I buy into the vision and support it, I'm likely to end up right where I started.
I want to like this idea, because I want to see more great, customer-service oriented banks. But I just can't quite bring myself to like it, because of the guaranteed change in ownership that is pending and the lineup of probable buyers.
I was the first investor in Simple. I can't speak for all the investors, but for me this was an investment in making the world a better place.
When Josh proposed the idea to me I asked a few people about their experiences with their banks. One of my friends told me how she had accidentally double-booked an airline ticket. This overdrew her account and--since she uses her debit card for everything--she started incurring overdraft fees on everything she purchased. She ran up several hundred dollars of overdraft fees before she even realized she was overdrafted. When she called Bank of America to explain, she was given the runaround. They eventually refunded half the fees (their standard offer) but refused to refund the rest without her jumping through hoops.
My friend is a single mom with two kids and a full-time job. She did not have time to constantly monitor her bank, nor the time to jump through the bank's hoops. Paying the fees caused her significant hardship.
The big banks in this country make their living by preying on those least able to protect themselves. They are evil. Again, I can't speak for the other investors, but I am not interested in selling out to a big bank. Success for me is either beating the other banks or forcing them to compete on Simple's terms: by treating their customers like people.
I agree that many retail banks wouldn't be missed by anybody if they disappeared tomorrow; and I applaud and support efforts to improve competition in the sector. I think that we share a vision of what should be in the retail banking sector.
That said, I can't help but think about the capital required to scale the business due to the high customer acquisition costs in the sector. This large capital requirement seems likely to reduce the ability of Simple to have meaningful control over their exit, as it won't all come from impact investors.
I hope the Simple team makes a mark on the market, but I still fear that success means that a large bank purchases them, increases the cross-sells, adds incremental fees, and "streamlines" customer service. I hope my concern is misplaced.
Either way, I'm excited to see what develops, and I think you made a great investment.
There's a ton about when and how and if we exit that's out of our control, and I wouldn't presume to predict exactly what's going to happen. But, please know that our goal is not to sell out to a big bank. We're building this because we want to use it, and part of what we want to use is a banking service that's provided by people who are acting in the best interests of their customers.
Unfortunately, I'm not sure that going with a smaller or local bank provides a more solid guarantee that you won't be banking with a giant down the road. The economic crisis of the past few years has seen a ton of consolidation in retail banking, and I think there's even more to come.
As a follow-on to this, it certainly appears (from quick searches of your site as well as reading through this thread) as though you are not disclosing which banks you are specifically partnering with... this is certainly your choice, of course, but given the events of the past few years, I think that there's a significant number of people that make an active choice not to use certain banks due to their past behaviors - if I were to sign up for something like this, I would be concerned that there would be a chance that I could be implicitly supporting a company that I'm actively not supporting today. Is there any notion of being able to "choose" the partner bank your account is held with, or at least being able to screen a list prior to opening an account?
What if you took mint.com, and instead of interfacing with hundreds of banks, you interface with a single bank. You can integrate much more closely and provide a better experience, and the customer shouldn't really care what the underlying bank is.
I wonder if the Mint team ever thought of going that route; they were/are very well placed to lead users into this model. Once you get used to the idea of being able to see all your accounts and varies metrics in one place it's obvious to appreciate being able to push data the other way and instigate transfers and bill payments from that nice central hub. Maybe the complications of getting the banks on board was the barrier.
The problem is that most customers do care what the underlying bank is, especially given the events over the past few years. The world may have been ready for this five years ago, but not anymore.
Who is the relationship with?
As in... who has my money?
I read it as them hiding that from you for simplicity... you get this one interface and customer service which is wonderful, but to achieve this they are the proxy to your bank?
So... do they set up the bank accounts, or do you? Do you have the ability to go straight to your bank, or does Simple preclude that ability?
In this text:
> Simple is not a bank. Simple replaces your bank. We build the services and support you need to manage, understand, and automate your everyday spending and saving. Meanwhile, we integrate with chartered banks who manage your deposits in FDIC-insured products. We take care of you, our partner banks take care of your money, and jointly, we’ve designed a better financial experience.
I come out confused. Who has the money, can I go straight to them to get it?
That's the missing bit of clarity that would make me feel the love (trust).