The Next Chapter
simple.com
simple.com
- Unlike Simple, Ally is actually a bank.
- We take deposits and then turn around and lend that money out primarily as auto loans.
- The rates we can pay are currently capped because we're still a TARP company.
Interface-wise there will be significant changes in the future (October-ish). Our entire online banking will be a single page application built using Ember, inspired by Simple. The transition will be ... interesting ... but after things settle down you can know that we're aiming to compete at least interface-wise in the space that Simple is in. (They have some fun things on the backend that we're not attempting yet.)
And if you look under the covers once we launch you'll notice that there is an API driving nearly everything. I wonder what might happen if that were, say, usable by others?
Most banks use what we term "bank-in-a-box" software provided by one of two vendors:
FIS - http://www.fisglobal.com/ Fiserv - http://www.fiserv.com/
In fact, just about the only ones who aren't using a complete bank-in-a-box solution are the megabanks, for example: BofA, Wells Fargo, Chase.
The upside of using a bank-in-a-box solution is that you can spin it up almost immediately and at very little cost (relatively). The downside is that you're running technology that, very often, was written last decade. For example: https://secure.ally.com/allyWebClient/login.do uses jQuery 1.3.2, released in 2009.
But worst of all, you can't really differentiate yourself from your competitors–they're using the same thing under the hood. In order to begin the process of differentiation you typically see banks progress through stages out of dependence upon these solutions.
1. First you enable service calls into the system of record (SoR).
2. Then you Balkanize your services, calling back and forth between your BiaB solution and your own custom component which reaches out to the SoR through services instead of the hosted, white-labeled BiaB. This is terribly slow. Remember what I said about last-decade technology?
3. Eventually a bank completely migrates completely to service calls on the backend to the SoR. But they still haven't implemented any of the reporting or back-of-house processing.
4. The ambitious banks then start trying to move the SoR and the back-of-house processing and reporting (this is a big deal) in-house. However, to work, this has to be a one-time switchover since "eventually consistent" is not a valid state for bank data.
Almost everybody stops before attempting Step 4. It starts getting expensive and hard really fast at that point–and almost no bank has that appetite for risk. However, even if you attempt Step 4, the legacy of your technical decisions has resulted in loosely coupled and often poorly integrated experiences wherein even pulling your data in-house likely doesn't fix it. At this point Step 5 is digging out of your technical debt, and I've yet to see any bank succeed at that.
Simple skipped Steps 1 & 2. They never incurred Step 5. They were insulated from Step 4 by using a holding bank. Step 3 was why they took so long to launch. On a technical level Simple is years ahead of every bank out there. Features they had the data for could be implemented in no time. Organizationally their mission was clear enough that everybody bought in. Their race, which I've said numerous times, was to catch up to Ally's marketing and deposit assets before Ally (or others) catches up to their technology. It's an asymmetric race, but not being a bank means that Simple couldn't leverage fractional reserve banking to its fullest which cuts into profit margins and makes it much harder to succeed. Their acquisition price implies to me that their burn rate was too high for their revenues to make the long game sustainable.
Contrast with BofA: "We spend, just overall, about $3 billion and change in annual technology development."
Simple's app is good, but in all honesty I don't have a huge need for it. Ally has a servicable app that does check deposits, and I use Mint to analyse my spending etc.
Also, Ally refunds all ATM fees, Simple doesn't. In a city like New York that's a huge benefit.
(Fwiw and ntim ally is from the remnants of GMAC a division of GM Corp.)
So far that's been the only real drawback, for me, at Ally. That and their website is pretty bare-bones compared, especially, with Wells Fargo's. WF has some pretty great budgeting tools Ally just doesn't have. Mint fills in that blank for me. I just became a Simple customer and am honestly a bit wary of them being part of an international banking group.
The only thing to be wary of is that you can't dispute fraudulent transactions way in the future, so your window isn't infinite.
Simple has one great downfall, in my opinion. They don't offer joint accounts. For me, that's a fatal flaw.
I've been at Ally for a year and was at ING Direct for several years prior. I never went to the physical bank, so I was happy to trade a brick & mortar branch for a higher interest rate.
My understanding is Simple just processes the transactions, without holding deposits. $1.7 billion sounds like a lot, but in Financial Services it's not that big. $117 million seems fair, if not high.
This is an excellent purchase by BBVA, and a steal at that price. In short order they will move the assets over from the holding bank (that's the guaranteed money). At that acquisition price I suspect that Simple was struggling to return a profit since they were not actually a bank.
Simple's funding likely only increased their runway while they were building a product that I'm guessing was net-negative. I don't feel like they could generate enough revenue to cover their burn rate using their holding bank strategy. If they could I suspect they would have continued down this path as a fearsome (future) competitor.
Once some bank builds the underlying technology in-house correctly they're going to be nigh untouchable.
The IRS FAQ says you can deposit joint refunds to single accounts but that it's up to the bank, so this is either a Simple or Bancorp limitation. Annoying for those of us trying to switch entirely.
Instant account-to-account transfer has been great, though, for my wife and I.
I don't know, doesn't really look like an improvment.
Simple excels in their user interface and experience. BBVA is a huge bank with lots of cash and backing.
Seems like these are good partners.
Get a better interest rate and I'm in.