Dated at just before 10 in the morning on Friday, July 17, 2009, the email simply read: “Let’s start a retail bank” in its subject line. It was a proposal you can imagine many would-be entrepreneurs were suggesting around the mid-morning water cooler. But three years, 125,000 waiting customers and an upswelling of media attention later, it appears this group has made more headway than most.
This is Simple, it’s not even really a bank. But we’ll get to that.
The foundation for Simple started coming together later that fall, with Reich sketching out a smaller-scale, more human approach to banking in a Brooklyn basement with co-founder Shamir Karkal. By November, there was one investor.
“We knew that our idea of straightforward, old-fashioned banking built on modern technology would go against the prevailing banking wisdom,” Reich says, “simply by having the consumer at its core.”
It was late 2009, a year after the United States economy nearly collapsed – a horrifying near-miss due to the activities of predatory lenders – and it was at or near the nadir of the sector’s public trust. It was, more than anything, a season of enduring outrage.
While that outrage would manifest itself in many ways across a broad social and economic spectrum, the response from the business community saw glimmers of innovation. In some cases, that innovation seemed to verge on quixotic, borne out of a desire to rework the fiscal status quo in ways that ultimately benefit the public. Reich and Karkal saw a deficit in banking of not just public trust, but even public empowerment and knowledge of its most fundamental fiscal processes – the root, some would suggest, of the whole problem.
“We believed that Simple could make a profit without misleading or confusing our customers,” Reich continued. “We theorized that by helping our customers understand their financial data, we’d be helping them make better choices about their spending.”
In saying as much, Reich effectively summarizes the entire set of principles that gave rise to Simple. In practice, however, what differs most strikingly from more traditional banks – from banks themselves, really – is the absence of fees and the general untangling of their processes. Clients receive a single card, transacting with a single account. The fees generating most of the revenue for the big banks are, for the most part, gone. The ones that remain, Reich says, aren’t exactly enough to line Simple’s pockets.
But where things really diverge from convention, addressing personal banking issues that Simple sees as one of the first dominoes to go, is how Simple’s model involves Simple itself “doing the math” of finance itself directly on the consumer’s behalf. The result is that the withdrawals requested by a client’s debit card are ultimately decided by Simple. “Let’s say, for example, that you had a credit line with us and a three month CD (Certificate of Deposit) with us,” Reich told Marketplace last year. “Do we want to break that CD or do we want to go to credit? We know how often you get paid, we know what you typically spend each day. We can do that math for you.”
It’s no different than the mental budgeting gymnastics that already accompany day-to-day banking, Reich says. Perhaps most striking of all, though, the difference in Simple’s model is its absence.
“If you had a pencil and paper at the time of purchase, you can do that math too,” Reich says. “But it’s a lot easier for a computer to do that, knowing we’re doing it with your interest in mind.”
Clean, user-friendly online tools, accessible both through its web and mobile presences, aggregate and translate that process into a breakdown of not only what’s in your account, but what’s actually safe to spend. Checking off another list on the tally of what the public generally hates about banking, that information is also provided in clear, direct, conversational language. Users can ask the system how much was spent on what during which period; Simple will respond. And if preferred, not only will an actual, flesh-and-blood human answer phone calls, but the idea, at least, is to get the same person each and every time. The model emphasizes trust, building better consumer confidence through better information and the means to access it. One can readily see Reich’s public-first strategy at play.
But while Simple streamlines and simplifies banking, the emphasis needs to remain that it is not a bank at all. What Simple offers is an interface, a set of progressive tools to access money held by a backbone of FDIC-insured banks.
“The banks we work with,” Reich further clarifies, “tend to not have customer-facing technology.” What they lack is the front end, and that’s how Simple earns its keep. “By working with us, we provide a better service and we acquire customers that the banks couldn’t otherwise get. And so they pay us for that service.”
As of July 25, 2012, over 125,000 people had requested an invitation to use the service. If it’s a referendum on anything, the relatively overnight success of Simple, having gone from an idea to a competitve banking service in just three years, indicates that the U.S. consumer public is done with the status quo in fairly significant numbers.
“We seek to change an industry,” Reich says. “The public’s trust in banks is at an all-time low. People deserve better.”