The week of April 19, 2015

One startup’s quest to become the one bank you don’t hate

By Dylan Love

Banks suck.

That’s my hot take at least. Banks are corporate entities operating within a legal framework to hang on to your money, turn it into more money, and share as little of it with you as possible. It’s confusing and bothersome, and worse: It’s normal. This is the unambiguous business model at work every day in the financial services industry, and it’s getting out of hand.

I confess that my moaning here stems from generalized, adolescent, “fight the power” punk rock leanings I haven’t totally been able to shake since high school. But I’m not alone. In a Gallup survey last year, only 26 percent of respondents said they had a “great deal” of confidence in banks, a figure that’s been flat since 2013.

When banks scale their operations in the name of the almighty dollar, they turn into multiarmed financial octopuses whose sheer momentum often pushes them toward being terrible. They get so big that they begin to exert political power. All the while, the banking public is placated with empty promises of low-interest loans, high-interest-bearing accounts, and improved customer service for all. But nothing seems to have really improved. Money isn’t even real, for crying out loud.

Josh Reich saw a lot problems in how people connect with their banks and the money contained within. Instead of complaining about it, he and cofounder Shamir Karkal started a bank of their own. The guiding principle would be that their bank would never profit off of customer confusion—the overdraft charges and other fees that are shamefully common for many major banks. Instead, customers would have access to all their money when they need it. No fees, no weird charges. A new normal.

It would be different and easy. It would be Simple.

And it works so well, I closed my Capital One account with glee years ago and never looked back.

How to start a bank from scratch

Simple isn’t technically a bank—it doesn’t offer joint accounts, loans, or business accounts—it just plays one on your smartphone.

The company essentially functions as a smart savings account, one that’s connected to a sleek and easy-to-use app.

By partnering with an expansive ATM network called AllPoint, the company turned more than 55,000 ATMs around the country into no-fee machines for Simple customers to use. The app has an ATM locator built in, and chances are that you’re near one already. For example, the ATMs in every single CVS pharmacy, 7-Eleven convenient store, and McDonalds are there for Simple customers’ convenience.

The company partners with the FDIC-insured entity Bancorp, which hangs on to customer money, to keep with a set of regulations that Simple wouldn’t be able to meet very easily on its own. This relationship is not some secret; the Bancorp logo is on the back of every Simple card. Though the company’s customers bank with Simple, their money lives at Bancorp, and Simple’s app puts an intuitive wrapper on things such that you’d never need to know this.

“I expected the amount of time required to build something in a regulated industry would make things difficult. I was wrong. It was really, really difficult,” Reich told me. “In our very first investor presentation we assumed it would take a year to come to market and that we’d be at a certain scale by 2015.”

It works so well, I closed my Capital One account with glee years ago and never looked back.

Reich was right and wrong at the same time. It actually took a couple years to launch Simple to the public, but his estimates for where the company would be by  2015 were spot-on. Despite launching later than planned, the company grew faster than expected. What Simple was offering was something a lot people clearly wanted: a bank they didn’t hate.

How to be a ‘good’ bank

Why is it so easy for me (or anyone) to vilify conventional banks? According to Reich, there are two main reasons. First, there’s so much surface area to find fault with in the industry, so many opportunities for things to go wrong. Second, most banks aren’t listening to customers with intent to improve.

“If you look at the amount of venting that occurs both online and offline about bank relationships, it multiplies because customers know they can’t vent to their banks in a meaningful way. Banks are disconnected,” Reich said. “A good business fixes things and moves on with life, but that doesn’t happen with banking. They simply aren’t connected with consumers.”

Generally speaking, banks cater to a hyperfocused form of capitalism and too easily forget role they play in society, Reich argues. “Our mission is to help people reconnect with their money, and this bleeds through with every interaction,” he insisted. “Banks are good at raising capital and buying competitors. Rarely do they acquire customers except by buying competitors. Simple started with no customers, so we set out to acquire people, not to feed a balance sheet.”

Despite growing to 200 employees since its formation in 2009, Simple continues to maintain a small, agile startup approach to its work. “Banks are really well-designed to say no to innovation,” Reich said. “We started with a clean slate that allows us to have some freedom to do things other banks couldn’t do.” Reich cited the company’s open office plan and Ping-Pong table as shaping company culture for the better. Large institutions want to clone these hip, cultural elements but do so without thinking about how and why they work to improve collaboration and blow off employee steam.

Despite being a darling of the financial technology world, Simple has had its share of bumps in the road. In late 2014, for example, some customers had to deal with significant downtime after a system upgrade left numerous bugs behind, including the inability to pay bills with some people locked out of their accounts for a full 24 hours. Those customers were peeved, but Simple’s authenticity and transparency, even in times of hardship, remained unaffected.  Reich took to the company blog to explain what was going on, even personally calling some of those affected customers, and the Oregonian estimates the company offered roughly $600,000 in payouts to inconvenienced customers.

Reich chalks up running a “good” bank to three things: constantly listening to customers, granting agency and ownership to employees, and hiring people who share the company’s purpose. There’s nothing especially revolutionary here. You’d expect to hear a similar party line rattled off by any rep for a brand-name bank. But Simple actually follows through on these ideas in such a way that customers feel watched over. Every interaction I’ve had with the company felt different. As a longtime customer, I feel understood, empathized with, and listened to whenever I have a problem that needs addressing. How many banking customers can say the same of their own larger institutions?

Simple listens to its customers so thoroughly that, according to Reich, 65 percent of its product ideas come directly out of customer relations. Simple employees are encouraged to explore and experiment, to try new things on a small scale to see if they work. One such experiment that’s become common procedure is to send customers handwritten thank-you notes.

“We absolutely do not incentivize the notes,” said head of public relations Krista Berlincourt, “but Simple was founded with design at its core and we’ve hired a team of skilled craftspeople who need a creative outlet. No budgets, no rewards, just customer appreciation for the sake of spreading the love.”

The customer service difference

I hate waiting in line. Simple’s digital-first ethos means I don’t have to queue up anywhere to wait for the next available teller. Instead, I can fire off what is effectively a text message to a customer service representative and see it answered pretty quickly. I recently used this feature to advise Simple of my plans to travel to Russia, which took under a minute of my time. Upon receipt of my message several minutes later, Simple made note of my travel plans so sudden charges from the other side of the world wouldn’t be flagged as fraudulent, locking me out of my account.

Simple isn’t technically a bank. It just plays one on your smartphone.

In this specific instance, I had time on my side; it wasn’t an urgent matter. For more immediate help, there is a toll-free number that summons a laidback Simple employee to help you out of whatever rut you find yourself in.

This easygoing, human interactivity may be Simple’s strongest asset in its move to cause trouble for the conventional banking system. You are no longer speaking to someone through bulletproof glass asking them for permission to touch your own money. Instead, customers peer through smartphone glass to talk to their “teller” the same way they interact with their friends and family.

Without the immense costs that other banks incur on upkeep and maintenance of their physical branches, Simple can afford to hire an army of people to ensure every user’s experience runs smoothly. Customer service representatives account for approximately half of the company’s 200-person team.

“Our customer service team does phenomenal work. Those [personal] relationships help you see what the product is doing,” Reich said. “Everything from financing a first album to rebuilding their lives after bankruptcy.”

Simple’s customer service reps are given the creativity and agency to “go crazy” however they see fit. Text-based communication is fluent and easy, usually ending with an optimistic, life-affirming GIF to conclude the interaction on a high note. Voice calls are answered fairly quickly, and people are only ever happy to help you sort out your problem.

The best part? This streamlined customer service works without my needing to leave the house.

What Simple means to the big banks

Simple merged in February 2014 with BBVA, the second-largest bank in Spain. BBVA is undeniably a financial powerhouse, but Reich insists that the merger has not affected day-to-day operations.

“BBVA is keeping very firm commitments to letting us remain independent,” said Reich. “As the CEO of Simple, I report to a board of directors rather than a business line manager. We run from the government’s perspective the same as a startup. BBVA is maintaining a very hands-off long-term view and believes the same thing we do—that banking is fundamentally a technology business.”

Everything is moving in the right direction for Simple, and it has the backing it needs to take personal banking to the next level. But the questions remains: On a long enough timeline, can Simple actually make a dent in the financial industrial complex?

“It will happen,” Reich said with confidence. “Look where our customers are coming from. They are not brand new customers coming into banking world. They’re customers leaving large banks for Simple because those banks suck.”

Photo via Simple.com | Remix by Jason Reed