Each of these new entrants can provide their services at a much lower cost than traditional banks because they are not saddled with the branch and heavy operational infrastructure. In addition, by limiting their product lines to retail transactional products, they can deliver very innovative digital tools that can make financial management fun and easy without needing to worry about disintermediation from existing products or needing to devote resources to hundreds of different banking priorities. In other words, a strong focus on the consumer benefits both the consumer and the new banking entity.

Change will continue in the marketplace as we truly move to a Bank 3.0 reality.

Delays by traditional banks in recognizing behavioral trends and responding to them could create disintermediation of valuable customers.

And don’t get complacent, because Movenbank will be introducing a similar model in the next few weeks, again offering what customers are asking for without needing to go through regulatory approval to get a bank charter. And banks in Australia, the UK and elsewhere are innovating in this space aggressively.

I don’t know about my friends in banking, but I would not be very comfortable being simply a wholesaler for innovative digital companies that have the foresight, focus and spirit to respond to quickly changing customer behaviors.

The article’s purpose was to make readers of The Financial Brand aware that there are new entities in the marketplace that look, feel and operate like a bank in ways that are more responsive and engaging than what is offered by many banks today.

Caveat Venditor

I do agree with others that the point isn’t their ultimate survival, but what they’ve brought to the marketplace. Almost any research about Gen Y (let’s make no mistake, that’s who they’re after here) will show you they desire transparency and honesty. Simple seems to understand that. Given how financial institutions have behaved the last 10 years, I’d suggest we all would like a little more transparency as well.

1) Does an “easy banking” strategy make sense?
2) Does Simple’s decision to build its business model without any fees make sense?

The two strategies are not inextricably linked. Simple could have easily chosen to deploy a fee-based “easy banking” model. But Simple didn’t want to be just the “easy” bank. They wanted to be the “easy” and “free” bank.

Most bank/CU executives should be able to articulate the cost/benefits of a simplified, streamlined, intuitive user experience (e.g., how much does it cost to redesign simpler account opening documents that will lead to more forms completed).

Conversely, most would probably struggle articulating how a no-fee business model pencils out.

How their business model works still is relevant as the post leads with positioning, competition, and the impact to your bank. We are also in this exact business so the economics play into executive decision making and budgets. It is hard to sell something to management if you cannot define its cost/benefit analysis.

Ignoring all the obvious financial issues for the moment, is the combining of Simple with PFM as the core product a far greater faux pas? PFM cannot be Simple

Also as Virgin discovered in the UK you can white label and talk the talk for a while but ultimately the final conversations will be bank.

So maybe not in it for the long haul as Andy suggests.

The company is effectively competing with Mint, Quicken, with a bank partnership which allows them to brand their activities and be the front facing focus for the bank. In the interim, The Bancorp Bank is making the money on this relationship. The business is a technology company that will ultimately be acquired by a bank or an Intuit/Deluxe/Fiserv type firm.

I like what they are doing and would love for a cost effective solution for my bank to provide a similar experience but right now the market price is not there yet. In time, this type of online relationship will be closer to the norm for banks.