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Comment by jackgavigan | Hacker News Reader

A source close to Simple tells The Verge that the company, which had raised $15.3 million, had been shopping itself around in search of a buyer since business wasn't progressing as quickly as it hoped. "They had kind of run out of steam," said the source...

Source: http://www.theverge.com/2014/2/20/5429916/bbva-acquires-simp...

Simply (no pun intended) building a layer on top of the existing banking infrastructure isn't really that innovative. The big potential in this space is building a new banking platform from scratch, instead of relying on existing/legacy technology. Unfortunately, the investment required is higher than VCs seem willing to risk.

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  > Simply (no pun intended) building a layer on top of the existing banking infrastructure...

This was what turned me off. I signed up for an invite right after they announced the service (something like 2-3 years ago at this point, when they were still BankSimple). But they took sooooo long to launch and in the meantime I became disenchanted with corporate banking. With Simple, the money still ends up in corrupt financial institutions and that's something I can't morally justify (I realize I am probably still doing business with corporate banks, but why do more than necessary?).

I now use a local credit union and I get far, far better service than I ever did with BoA. The credit union has a branch 3 blocks from my apartment, across the street from where I work, and on campus at school. Plus they have ATMs in many of the local businesses I visit. Simple just can't compete with that, so for me, it's all upside.

Yes, I was in early too. I never committed money to them because they just kept missing features that I needed. Like transferring money to another bank. Or transferring money to another bank to an account that isn't mine. Or a savings account (or the much ballyhoo'd but never launched automagic movement of spare money into a savings account to get the interest working for you).

It ended up that customer service ended up being pushed as the differentiator (the interface I can get with Mint), but I've had great customer service experiences with both Ally and Charles Schwab. And I get all those previous features I wanted, plus things like ATM refunds. So Simple ended up being a feature-bare product in comparison.

I think their customer growth tailing off was a direct correlation to their feature launch velocity tailing off, and I attribute that to the legal stuff around banking being really hard, rather than any slacking on their part. Hopefully the purchase will allow them to leverage more existing agreements to get more features up and running.

> Like transferring money to another bank. Or transferring money to another bank to an account that isn't mine.

These sound like good avenues for fraud, i.e. places where a bank would need to put in a fee so they can afford computers and people to watch for fraud when someone attempts one of these transactions.

> Or a savings account

My Simple account bears interest every month. I suspect they implemented this automagic movement of money without actually exposing it to the user.

Just because something is a possible attack vector for fraud, doesn't mean it shouldn't exist. Other US banks offer the feature. And, at least in the UK, it's a standard thing to do. If they combined with two-factor auth, then it's no less secure than the debit card and PIN they offer.

The interest of a Simple checking account is no more than the interest on any other banks checking account, so I don't think they're doing it at all. Checking accounts usually accrue some tiny amount of interest.

Help me out here, I'm not sure if I'm following: Is it _not_ possible to transfer money from Bank A, your account, to Bank B, your brother's account with that system? I.. guess I'm missing something, because that surely cannot be true - that's how I pay my bills.

Yes, it's not possible. This is the very same way my wife and I were running bills for years, and yes, that's why I didn't move to Simple due to that feature not being there.

Interesting. So, if you forgive my ignorance once more: How do you use a Simple account? I mean.. What can you do with it? Grab cash from an ATM only? Write (oh my god, please say no) checks backed by that account?

In other words: If you cannot transfer the money to a different account, how do you USE the money at all?

You still have a debit card that you can make purchases anywhere with.

Simple was/is a dressed up version of a prepaid debit card with a good mobile app and a good web ux. Typically prepaid cards net $1-$4 per active user per month depending on the level of fees. An active user is someone that has loaded cash onto the card. So if Simple had 100,000 customer which could translate into 100,000 loaded cards, its gross revenues would be between $100K-$500k per month (1.2-6m per year). My guess is the 100K number is simply customers that ever signed up for it and that their active accounts (loaded cards is much much lower). Kudos to the Simple board, investor and team - selling at that sort of price is unbelievable. I would happily work with any investor who could help me get that sort of valuation for my companies.

I use simple as my main bank account, and I'd say it is pretty innovative - essentially because usability is a feature and simple has by far the best usability of any bank.

What lets them down is the overall power of their offering and the rate at which they have been developing it. If the banking backend was the constraint, maybe this will help them to accelerate.

Yes on the slow development rate. I pretty much signed on to their mailing list as soon as they announced themselves. After hearing nothing for over a year I gave up and switched from bricks and mortar to ING (now Capital 360) which solved most of my issues, so my motivation to go through the bank changing hassle is now really small. I think it took something like 3 years to actually get the "you can now use us" email.

Entrepreneurs used to start banks knowing they were building a lasting institution.

Banks have survived hundreds of years, through hardships like depression and war, long after their founders were all gone.

Now the business model is "shop around for a buyer if your growth isn't high enough in the first five years."

Kind of sad.

> The big potential in this space is building a new banking platform from scratch, instead of relying on existing/legacy technology.

It's likely nearly impossible to build a bank from scratch because of regulatory hurdles. That's why Simple had to team up with a partner bank instead of going it 100% alone. I remember reading a blog post from Simple about it, it seemed they had no choice to partner with an existing bank (if I find the post I'll share it). The banking system is broken on purpose. This is why banks operate like it's the stone age and get away with awful service and fees - there's little chance of nimbler competitors coming along and eating their lunch.

Another piece of the puzzle is that a single new bank isn't going to have it a whole lot better when it comes to interbank stuff (probably they have it worse, having to build useful relationships).

> Another piece of the puzzle is that a single new bank isn't going to have it a whole lot better when it comes to interbank stuff (probably they have it worse, having to build useful relationships).

Interbank transfers -- wire and ACH -- are processed through central clearinghouses. You just show up with a copy of your bank charter, pay the fees, and you're now on equal terms with any other bank when it comes to moving money around.

The hard part is getting that charter in the first place. Just two months ago, the Bank of Bird-in-Hand, Pennsylvania became the first new consumer bank to be chartered in the United States since 2010. One bank, in the past three years. It was huge news in the banking world, even made the Wall Street Journal and the Financial Times. It's an Amish bank -- they have a drive-through lane for horses and buggies.

They had to spend $800,000 just to get approved. http://lancasteronline.com/business/new-bank-of-bird-in-hand...

Okay, that means that it won't be any harder for them, but their money transfers will still be just as bad as everybody else.

Not so sure. In the UK we had Metro Bank a US funded startup bank, started a couple of years ago.

It's been a long, hard slog for Metro Bank. To date, they've raised £641m (that's over $1bn) in investment and racked up total cumulative losses of over £130m ($220m).

And don't forget Metro didn't build their own platform - they outsourced all their technology.

Despite their apparent enthusiasm (see links at the bottom of this post), I don't think VCs are ready to sink over a billion dollars into a single startup, even if it is a bank. They're looking for billion-dollar exits like Facebook and Whatsapp, not a $1bn investment with a $100+bn exit.

VCs Start Pining to Own a Bank - http://www.bankinnovation.net/2014/02/vcs-start-pining-for-a...

“I am dying to fund a disruptive bank.” - Marc Andreessen - https://twitter.com/pmarca/status/432651247909208064

I'm pretty sure the more awesome VCs, like hn-user pmarca at a16z, would have no problem writing checks for $100mm+ to fund a team to fix banking. The other day they were actually bemoaning the lack of people trying to do so.

link? Or are you referring to "Why BitCoin Matters"?

twitter.com/pmarca about 5 days ago. It's painful to search, but related to this conversation thread: https://twitter.com/Shotz018/status/435568470093070337

It was not innovative in terms of technology. It was innovative in terms of design. Which can be just as big of a leap forward.

Sure, it would be awesome to rebuild a bank from scratch, but that doesn't mean there wasn't innovation here.

Of course it's innovative. They built a better mousetrap. It's not disruptive per se, but almost nothing else is.

What is a bit sadder is that they weren't able to stick it out until they started building their own platform.

I always wondered how Simple would acquire non early-adoptor customers. It seems with BBVA there is a natural channel to international markets and millenials.

I agree 100%.

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