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Summary:

BankSimple, a New York start-up, is poised to begin a limited beta soon, as it looks to launch a next-generation online banking service that combines real-time data, predictive money management and smartphones without the fees and penalties associated with many banks.

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BankSimple is betting there’s big business in modernizing and mobilizing the banking experience and making it super-consumer-friendly. The New York startup is poised to begin a limited beta soon, as it looks to launch a next-generation online banking service that combines real-time data, predictive money management and smartphones without the fees and penalties associated with many banks.

Basically, BankSimple is trying to birth a new financial service devoid of the old patterns, branches, fee structures and slow embrace of technology that mark today’s financial institutions. The company has some serious smarts and respected backers. Led by CEO Josh Reich, a former marketing and quantitative finance analyst, BankSimple also includes CTO Alex Payne, one of the first Twitter employees. The startup has raised $3.1 million dollars to date from First Round Capital, IA Ventures, Village Ventures and investors Ron Conway, Nauiokas Park and Jerry Neumann.

BankSimple, to be sure, is not a bank. It will partner with smaller banks who will hold the federally insured accounts. What BankSimple will do is provide an online interface that allows users to combine all their credit, savings, checking and termed accounts into one banking card. Customers can set their spending limits and savings goals with BankSimple and the service will dynamically manage their money between accounts to ensure they stay on their targets.

It takes a bit of faith to entrust one’s money to an online service like this, but Reich believes customers will learn to trust BankSimple because it provides real-time updates on spending via the web and through Android or iOS apps. The system is designed to help users manage their money, as opposed to traditional banks that have increasingly relied on revenue from fees and penalties when customers make mistakes, Reich said. In fact, BankSimple does away with most fees and penalties because it doesn’t have to support costly branches. The service makes its money off interest and interchange fees.

“We don’t make money off the customers mistakes, which is the way it should be,” Reich said. “If our incentives are in line with our customers and we have the right set of data, we can put your money on cruise control.”

Reich said BankSimple is taking a big data approach to small personal finance data, applying statistical analysis and machine learning to help create a system that responds to a user’s needs. You can hear more about how financial institutions are using big data at our Structure Big Data Conference on March 23 in New York.

Smart phones are an essential aspect of BankSimple’s business plan. Users can take pictures of checks to deposit them without sending them in. But more importantly, customers are able to monitor their funds in real time from their phones. BankSimple will update its transactions instantly to let people understand how their transactions are affecting their goals. The phones are also used to help combat fraud by providing instant alerts on purchases. BankSimple can also see if a user’s location matches the location of a transaction to monitor for fraud.

The service has been testing with friends and family and will soon open up to a private beta. Reich said 30,000 people have signed up to be part of the beta, though the initial group of beta users will be limited at the start. The company is waiting right now on banking cards to launch the service. When the cards arrive, customers will be able to use them at 35,000 Allpoint ATMs for free at 7-11 branches and other drug and convenience stores. While BankSimple won’t have local branches, the company is investing heavily in call centers to provide responsive customer service.

Can BankSimple convince users that they should ditch their old banks in favor of a start-up? Though many consumers have little love for their banks, it’s an institution that may be hard to part with. But I like how BankSimple is trying to leverage data and mobile to give us something new in banking. Even if it flames out, those same tools need to be better utilized in the banking experience.

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  1. I’m really curious to see how the automated movement of money will play out from a UX perspective. Seems a bit risky that money will be moved in real-time based on goals that aren’t real-time. I set goals in Period 1 based on some threshold. Those goals will remain static through Period 2 regardless of my situation.

  2. The ability to see the hit on your savings in real time when buying items “willy-nilly” is what makes BankSimple so sexy. I don’t have this issue, but I know many people who wonder how they spent their entire month’s paycheck on the little things. Plus, as Americans we are horrible budgeters and hopefully BS (awesome acronym) can turn that around as well.

    Thanks for the great interview everyone.

  3. “We don’t make money off the customers mistakes, which is the way it should be.” – Totally awesome.

    I have big hopes that they will in fact revolutionize consumer banking in the US. And I wish they were hiring programmers.

  4. Reminds me of the promise of Wingspan back in 2000.

    Damn, I’m old.

  5. BankSimple definitely has a market. It would appeal to Gen Yers and some GenXers as they are already used to trusting their financial data to online websites, like Mint. BankSimple seems to be adopting concepts similar to Mint and is funded by the same VCs. It would be interesting to see how widely BankSimple would be adopted.

  6. Phones Becoming Frontline in Credit Card Fraud Battle : Tech News and Analysis « Thursday, February 17, 2011

    [...] data to help alert users on their computers and phones. BankSimple, another New York start-up is creating an online banking service that focuses on mobile phones and will leverage the phone’s location to aid in fraud [...]

  7. Reminds me of the promise of NetBank back in 1995.

    Damn, I’m old(er).

  8. bankalchemist Thursday, March 24, 2011

    ….but of course, living up to its name…banksimple stupid. they are not a bank so whatever they may have saved in providing this wizbang new service will be lost in exchange fees. The comments regarding Wingspan and NetBank are dead on lots of promises little delivery. This is a rework of a McKinsey paper on the prepaid card space which is flooded with players from rappers to whomever that has distribution. bankalchemist.

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