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Banking slowly simplifies

By David McMillin · Bankrate.com
Saturday, May 12, 2012
Posted: 6 am ET

A few months ago, my co-blogger Claes Bell covered a tech startup called Simple, which aims to deliver basic banking services without being a real bank. With no physical branches, an ATM network of more than 40,000 cash machines and a business model that doesn't profit from fees, I see quite a few reasons why consumers will be intrigued by the alternative.

I traded notes with Adam Erlebacher at the Portland-based company, and he tells me Simple has received more than 100,000 requests to be part of the service (since it's still in beta mode, you have to ask for an invitation to join). For a startup looking to battle the banking industry, I'd say the 100,000+ figure is quite impressive. Simple faces two challenging tasks: Compete with large banks' massive marketing budgets, and break the old-school mindset that physical bank branches are an essential piece of personal finances.

From an uptick in prepaid card use to protests outside one of the nation's biggest banks, it's clear that consumers are hungry for new ways to manage their money. However, consumers have also grown accustomed to immediate solutions: 24/7 customer service, social media responses within seconds and text message alerts when checking account balances are low.

In my mind, that immediacy represents a big stumbling block for Simple. The website reads, "If you signed up during or before spring of 2011, you should be getting your invite before midsummer 2012." No matter how frustrated you might be with checking account fees, it doesn't take you more than a year to open a free account at a community bank or a credit union.

Now, I realize I sound a bit impatient, and I do recognize that getting an entirely new program off the ground takes time. As Simple works to fine-tune their services, I expect the pace of new account approvals to pick up. I'm curious if the number of new account requests will do the same.

What do you think? Can a tech startup topple the traditional banking model?

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1 Comment
Karen Gordon
May 18, 2012 at 11:41 am

While this is an interesting approach to traditional banking, I don't foresee it overtaking the traditional banking model. I agree that it does take time to launch a new program, but if they aren't nimble enough to take on new accounts for more than a year I'm not sure as a consumer I would trust their model. Consumers will always need mortgages, car loans, student loans and investment opportunities that seem to be precluded from the Simple alternative. Traditional banks have that covered. ING is a non brick and mortar banking operation that has also been quite successful. They have gradually added new services over the years as they evolve. The time is right for innovation in banking but the lead time for Simple isn't capitalizing on the current window of opportunity quickly enough.