| By Jim Bruene on September 14, 2010 2:54 PM | Comments (3) |
I'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.
I 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.
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.
Most Recent Posts:
- Citibank Helps Users Better Understand Prior Payment Activity When Paying Credit Card Bill Online - May 16, 2012
I have been reading your coverage of bank simple over the year and thank you for the ongoing updates. We seem to learn more from your reporting than from the start up itself. While I don't doubt their investors true motive is a big return (your note 1), I think it's ironic that you characterize their business approach as being more credit union like. Having worked in both sides of the industry, I think there are plenty of customer/member centric banks and credit unions - simply due to the fact that they are more community based. But I get your point. More importantly, I do wonder how many of their 20,000 signups are banking or tech insiders like us that are more curious about the business model than actually plan to bank with them. Between this startup, and other Bank 2.0 news post Finovate this year, I'm just glad banking is finally starting to get interesting again. We need to consider new business models that have a renewed focus on innovative fintech and user experience. I look forward to watching how this one turns out. Thanks Jim as always. -Brad Leimer
@Brad
I try to steer clear of the credit union vs. bank debate. Most companies, publicly held or not, are just trying to do a good job for their customers at a fair price. I guess what I meant is that BankSimple seems focused on serving up a great user experience for a limited customer base, then seeing what happens. Not trying to take over the world, at least not yet.
Your point on the 20,000 wait list is valid. Could only be 5% conversion to customers there...will be interesting to see. But it does look like they have a good head start on their 10,000 to 15,000 first year goal.
The fact that BankSimple has a user-goal versus a deposit/loan growth goal, affirms this is a tech company masquerading as a bank. Don't get me wrong, I am big on new technology within the industry that helps consumers make informed financial decisions. But the number of people on the invite list who actually convert to customers and how much money they place in a fledgling "financial institution", are going to limit BankSimple's success. IMHO, they will ultimately fail as an actual bank, but the technology built will either be licensed as a white-label solution like Geezeo, or sold outright to one of the big banks.