Anti-big bank sentiment still runs high. If you recently changed your banking relationship you are not alone. Javelin Strategy estimates that 5.6 million U.S. adults changed banking providers in the past 90 days (January 26, 2012 article). Twenty six percent of the switchers stated that they switched in order to avoid the high fees their former banks charge. Some switched banks due to moving to a new residence and simply wanted a bank closer to that residence. Other reasons included lack of customer service which, if high fees were not enough, provided the additional motivation to change banking relationships.
If you want lower fees, don’t care about having a brick and mortar branch to stop by and are comfortable banking on your smartphone then Alex Payne, co-founder of Twitter, and Josh Reich have the answer for you. Payne is also co-founder and chief technology officer of BankSimple. BankSimple restricts its service solely to online banking; however, it charges no fees and requires no minimum deposits. BankSimple has headquarters in New York (eight employees) and right here in Portland in our Pearl District (seven employees). We should note that the use of the word bank in its name is a bit misleading. BankSimple is not actually a bank, but customers’ money is protected as funds are held in accounts at a partner bank in FDIC-insured accounts.
There are no paper checks. Customers receive a debit card and have 24 hour access to the bank’s website and use of a mobile banking application allowing customers to manage cash in real time. Although the company does not provide many of the services of a traditional bank it does offer a unique service that many customers may find very attractive. Customers can earmark funds for specific purposes such as bills or saving. BankSimple will notify you with instant text-messages to your phone telling you how much you can spend without dipping into the various “buckets” of cash you have designated for specific purposes.
Given the limited services it provides some questioned if BankSimple would have enough appeal to survive and prosper. Well, as of this writing there is a two week wait to open an account at BankSimple and, launched only a year ago, BankSimple has 35,000 customers. Is that a definitive answer to the question? No, but it certainly represents a propitious start.